WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT
Volume 6, Issue 2
EDITOR-IN-CHIEF Dan Strong
EXECUTIVE EXECUTIVE EXECUTIVE EDITOR MANAGING EDITOR DEVELOPMENT EDITOR Ashley H. Waterbury Scott D. Salmon James K. Pickle
NOTE EDITOR MANAGING EVENTS STAFF EDITOR Matthew S. Hale EDITOR Sean T. Twomey Alison Leary
SENIOR ARTICLES FACULTY ADVISORS LEAD ARTICLES EDITORS EDITORS Professor Albert V. Carr Elizabeth A. Farrell Jessica Chi Professor Mark A. Regan Loper Amy Forman Drumbl Whitney D. Pulliam Cameron E. Tommey Professor Joan M. Ryan Redd Shaughnessy
STAFF WRITERS Michael Cooke Caroline E. Colpoys Anne H. McPherson James A. Cooper Richard Clagett Samantha Nicholson Kaitlin DeCrescente Tyler A. Carpenter Christina Rossi Amanda L. Fisher Ashley N. Barendse Kathleen Ryland Margaret Hayes Brandon S. Allred Aaron Siegrist Max Sender
Washington and Lee University KENNETH P. RUSCIO, B.A., M.P.A., Ph.D. President of the University
Deans NORA V. DEMLEITNER, B.A., J.D., LL.M. Dean and Roy L. Steinheimer Jr. Professor of Law SAMUEL W. CALHOUN, B.A., J.D. Associate Dean for Academic Affairs, Professor of Law ELIZABETH BRANNER, B.A., M.B.A. Assistant Dean for Law School Advancement CLIFF JARRETT, B.A., J.D. Assistant Dean for Career Planning PETER JETTON, B.A., M.A. Director of Law Communications SHAWN MCSHAY, B.S., M.B.A. Assistant Dean for Admissions MARY Z. NATKIN, B.A., J.D. Director of Academic Success and Law Related Service Programs CAROLINE OSBORNE, B.A., J.D., LL.M., M.S.L.S. Assistant Dean for Legal Information Services S. BRETT TWITTY Assistant Dean for Student Affairs
Emeritus Faculty WILLIAM S. GEIMER, B.S., J.D. Professor of Law, Emeritus EDWARD O. HENNEMAN, B.A., J.D. Associate Professor of Law, Emeritus LEWIS HENRY LARUE, A.B., LL.B Class of 1958 Law Alumni Professor of Law, Emeritus ANDREW W. MCTHENIA, JR., A.B., M.A., LL.B. James P. Morefield Professor of Law, Emeritus JOSEPH E. ULRICH, B.S., J.D. Professor of Law, Emeritus
Permanent Faculty DAVID BALUARTE, B.A., J.D. Associate Clinical Professor of Law and Director, Immigrant Rights Clinic
C. ELIZABETH BELMONT Director, Community Legal Practice Center and Associate Clinical Professor of Law JOHANNA E. BOND, B.A., J.D., LL.M Associate Professor of Law DAVID I. BRUCK, B.A., J.D. Clinical Professor of Law and Director, Virginia Capital Case Clearinghouse CHRISTOPHER M. BRUNER, A.B., M.Phil, J.D. Associate Professor of Law JUDY CLARKE, B.A., J.D. Professor of Practice ROBERT T. DANFORTH, B.A., J.D. Professor of Law MARK A. DRUMBL, B.A., M.A., J.D., LL.M., J.S.D. Class of 1975 Alumni Professor of Law and Director, Transnational Law Institute MICHELLE L. DRUMBL, B.A., J.D. Associate Clinical Professor of Law and Director, Tax Clinic DANIEL EVANS, B.A., B.S., J.D. Professor of Practice JOSHUA A.T. FAIRFIELD, B.A., J.D. Associate Professor of Law JUDGE JOHN F. FORSTER, JR., B.A., J.D. Professor of Practice and Director, Judicial Externships JILL M. FRALEY, B.A., J.D., LL.M., J.S.D. Associate Professor of Law SUSAN D. FRANCK, A.A., B.A., J.D., LL.M. Associate Professor of Law MARK H. GRUNEWALD, B.A., J.D. James P. Morefield Professor of Law BRANT J. HELLWIG, B.S., J.D., LL.M. Professor of Law MARGARET HOWARD, A.B., J.D., M.S.W., LL.M. Law Alumni Association Professor of Law MARGARET HU, B.A., J.D. Assistant Professor of Law LYMAN P.Q. JOHNSON, B.A., J.D. Robert O. Bently Professor of Law TIMOTHY S. JOST, B.A., J.D. Robert L. Willett Professor of Law
JOHN D. KING, B.A., J.D., LL.M. Associate Clinical Professor of Law JUSTICE DONALD W. LEMONS, B.A., J.D. Distinguished Professor of Judicial Studies ERIK LUNA, B.S., J.D. Sydney and Frances Lewis Professor of Law TIMOTHY C. MACDONNELL, B.A., J.D., LL.M., LL.M. Associate Clinical Professor of Law, Director, Black Lung Clinic ANN MACLEAN MASSIE, B.A., M.A., J.D. Professor of Law RUSSELL A. MILLER, B.A., J.D., M.A., LL.M Professor of Law DAVID MILLON, B.A., M.A., Ph.D., J.D. J.B. Stombock Professor of Law JAMES E. MOLITERNO, B.S., J.D. Vincent Bradford Professor of Law BRIAN C. MURCHISON, B.A., J.D. Charles S. Rowe Professor of Law DOUG RENDLEMAN, B.A., M.A., J.D., LL.M. Robert E.R. Huntley Professor of Law THOMAS H. “SPEEDY” RICE, B.A., J.D. Professor of Practice, Transnational Law Institute CHRISTOPHER B. SEAMAN, B.A., J.D. Assistant Professor of Law VICTORIA A. SHANNON, B.A., J.D. Assistant Professor of Law JOAN SHAUGHNESSY, B.A., J.D. Roger D. Groot Professor of Law KISH PARELLA, B.A., M.Phil., J.D., LL.M. Assistant Professor of Law SARAH K. WIANT, B.A., M.L.S., J.D. Professor of Law
Visiting Faculty MICHAL BUCHHANDLER-RAPHAEL, L.L.B., LL.M., S.J.D. Visiting Assistant Professor of Law ALBERT V. CARR, B.A., J.D. Visiting Professor of Law KEVIN L. COPE, B.A., J.D. Visiting Assistant Professor of Law DAVID EGGERT, B.A., J.D. Visiting Professor of Law MATTHEW ENGLE, B.A., J.D. Visiting Professor of Law JEFFREY KAHN, B.A., J.D. Visiting Professor of Law SUZETTE M. MALVEAUX, B.A., J.D. Visiting Professor of Law TATJANA PAPIÄ, B.A., J.D. Visiting Professor of Law TODD C. PEPPERS, B.A., J.D., Ph.D. Visiting Professor of Law JONATHAN SHAPIRO, B.A., J.D. Visiting Professor of Law CHRISTOPHER J. WHELAN, LL.B., M.A., Ph.D. Visiting Professor of Law
Adjunct & Extended Faculty HARLAN RAY BECKLEY, B.S., M.Div., M.A., PH.D. Lecturer in Religion & Law, Director, Shepherd Program, Fletcher Otey Professor of Religion NEIL V. BIRKHOFF, B.A., J.D., LL.M. Adjunct Professor of Law MICHELE S. BURKE, B.S., J.D. Professor of Practice R. EDWIN BURNETTE, JR., B.A., J.D. Adjunct Professor of Law GREGORY J. COOPER, B.A., Ph.D. Lecturer in Philosophy & Law, Associate Professor of Philosophy JOHN H. CRADDOCK, JR., B.S.E., J.D., LL.M. Professor of Practice DAVID DEJONG, B.A., J.D., LL.M. Adjunct Professor of Practice KELLY L. FAGLIONI, B.A., J.D. Professor of Practice AARON SAMUEL HAAS, B.A., J.D. Oliver Hill Fellow (Adjunct) DAVID L. HEILBERG, B.A., J.D. Adjunct Professor of Practice JAMES W. JENNINGS, JR., B.A., J.D. Professor of Practice TIMOTHY JOSEPH KEEFER, B.A., J.D. Adjunct Professor of Law
REX LAMB, B.A., J.D. Adjunct Professor of Law CHARLES LOWNEY, B.A., M.A., Ph.D. Lecturer in Philosophy & Law, Visiting Professor of Philosophy TIMOTHY LUBIN, B.A., M.T.S., Ph.D. Lecturer in Law and Religion, Professor of Religion A. CARTER MAGEE, JR., B.A., J.D. Professor of Practice JAMES E. MAHON, B.A., M. Phil., Ph.D. Lecturer in Philosophy and the Law, Professor of Philosophy JOHN LAWRENCE MANNING, B.S., LL.B., J.D. Adjunct Professor of Law JOHN J. MILES, B.S., M.A., J.D. Adjunct Professor of Law FRANK W. MORRISON, B.A., J.D. Adjunct Professor of Law LAWRENCE LLOYD MUIR, JR., B.A., J.D. Adjunct Professor of Practice STEPHEN WILLS MURRAY, B.A., M.Phil., Ph.D., J.D. Adjunct Professor of Law CAROL D. NEWMAN, B.A., PH.D., J.D. Professor of Practice J. LEE E. OSBORNE, B.A., J.D., LL.M. Adjunct Professor of Law G. MICHAEL PACE, JR., B.A., J.D. Professor of Practice JAMES H. PANNABECKER, B.A., J.D., M.R.P. Professor of Practice HOWARD PICKETT Adjunct Instructor of Shepard Poverty CHRISTOPHER P. RUSSELL, A.B., J.D. Adjunct Professor of Law GILBERT E. SCHILL, JR., B.A., J.D. Professor of Practice JAMES S. SEEVERS, JR., B.A., J.D. Professor of Practice GUY BRYAN SEREFF II, B.S., J.D. Professor of Practice JONNIE SPEIGHT, B.A., J.D. Adjunct Professor of Law GREGORY N. STILLMAN, B.A., J.D. Professor of Practice DANIEL J. VICTOR, B.A., J.D. Professor of Practice ED WALKER, B.A., J.D. Professor of Practice WILLIAM P. WALLACE, JR., B.A., J.D. Adjunct Professor of Law MARK ALLEN WILLIAMS, B.A., J.D., M.B.A. Professor of Practice R. CRAIG WOOD, B.A., M.Ed., J.D. Professor of Practice ROBERT C. WOOD, III, B.A., LL.B. Adjunct Professor of Law HENRY L. WOODWARD, A.B., LL.B. Professor of Practice CHARLES L. WOODY, B.A., J.D. Adjunct Professor of Law
The Washington and Lee Journal of Energy, Climate, and the Environment sponsors an annual symposium examining prospects for change in an important area of the law dealing with energy, climate, or the environment.
Previous Major Symposia
Protecting Water Resources: Are Corporations (2015) Responsible? (February 13, 2015)
Environmental Justice (2014) (March 21, 2014)
The “All of the Above” Strategy: Evaluating the (2013) Obama Administration and the Future of Federal Law and Policy on Energy and Climate Change (February 1, 2013)
Reclaiming Environmental Federalism (2012) (February 17, 2012)
Regulating Resource Extraction: Creating Order in (2011) a Legal Morass (February 18, 2011)
The Intersection of Renewable Energy Development (2010) and Geoengineering (March 19, 1010)
Climate Policy for the Obama Administration (2009) (February 20, 2009)
WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT
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WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT
Volume 6 2015 Number 2
ARTICLES
The Privatization of Antartica 379 Leonid A. Krasnozhon, Pedro A. Benitez, and Walter E. Block
Rising Seas, Receding Ethics? Why Real Estate 402 Professionals Should Seek the Moral High Ground Keith W. Rizzardi
Implementation of the EU Directive on Environmental 451 Impact Assessment in the Czech Republic: How Long Can the Wolf Be Tricked? Veronika Tomoskova
STUDENT ARTICLES
An Increase in Beach Reconstruction May Mean a 509 Decrease in Property Rights: The Need for a Multi-Factor Balancing Test when Protecting Waterfront Property Amy Forman
Necessary Change: Re-Calculating Just Compensation for 552 Environmental Benefits Scott Salmon
Moving Military Energy “Behind the Fence:” 592 Renewable Energy Generation on U.S. Defense Lands Cameron E. Tommey
The Shifting Use of the So-Remote-as-to-be-Negligible 634 Standard for Qualified Conservation Contributions Ashley H. Waterbury
The Privatization of Antarctica
Leonid A. Krasnozhon, Pedro A. Benitez, and Walter E. Block*
Abstract
The seventh continent, Antarctica, is a no man’s land in terms of economic development. This is not due to its harsh weather conditions. Parts of Alaska, Canada and Russia are almost equally inhospitable. Rather, this Article argues that Antarctica’s economic isolation is the result of political paralysis and a lack of appreciation for private property rights. This Article makes the case for adding Antarctica to the family of nations, whether as one or several countries.
Table of Contents I. Introduction ...... 379 II. History ...... 382 III. Resources ...... 387 IV. Criticisms ...... 392 V. Conclusion ...... 400
I. Introduction
It is not uncommon to hear claims that humanity will be the cause of its own demise.1 Most people have a fatalistic view that they are bound to bring about their own doom.2 Recently, the
* Dr. Leonid Krasnozhon, Assistant Professor of Economics, Loyola University New Orleans, New Orleans, LA, email: [email protected]. Pedro Benitez, Honors Program, Loyola University New Orleans, LA, email: [email protected]. Dr. Walter Block, Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics, Loyola University New Orleans, New Orleans, LA, email: [email protected]. 1. See Nick Bostrom, Existential Risks: Analyzing Human Extinction Scenarios and Related Hazards, 9 J. EVOLUTION & TECH. 2002, at 1, 3 (describing the threats facing humanity). 2. See id. at 5 (stating that it is pointless to “wallow in gloom and doom”).
379 380 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) environment has been a great source of distress.3 Are we running out of resources? Are we extracting them in such a way that we will contaminate the planet and provoke climate catastrophes? Is it possible to stop this seemingly oncoming Armageddon? Humanity’s greatest resource is creativity.4 Historically, we have proved fatalists like Thomas Malthus 5 wrong, 6 demonstrating that even with growing populations we can control our reproduction and boost our food production. Since humans always face scarcity, they have been forced to innovate.7 When competing in a free market, the desire to reduce costs and maximize profits leads them to seek ways to obtain the most out of available resources. 8 Substitutes also appear, often times a result of technological advances. All that is necessary is some quantity of resources that can be exploited for the aforementioned innovation to take place. That is where Antarctica comes in. When considering the continents, the names of the big six tend to pop into mind. Yet this is the fifth largest continent, and as a landmass of such magnitude, contains much untapped potential.9 From oil to a gigantic mass of protein in the form of
3 See id. (noting that intelligent life could go extinct in sudden disaster). 4. See JULIAN SIMON, THE ULTIMATE RESOURCE 3 (Princeton University Press, ed., 1st ed. 1981) (noting that Julia Simson a free market economist, offered a wager to economist Paul Ehrlich to disprove the idea that humanity was running out of resources). By tracking the prices of several resources over a period of ten years, they would decide if they’d become more scarce of plentiful. See id. Simon won the bet as businesses develop new ways to more efficiently use their resources, as well as seek alternate resources. See id. 5. See generally THOMAS MALTHUS, AN ESSAY ON THE PRINCIPLE OF POPULATION (1798). 6. See LIONEL ROBBINS, THE THEORY OF ECONOMIC DEVELOPMENT IN THE HISTORY OF ECONOMIC THOUGHT 22–33 (1966) (analyzing the relation between world population size and well-being). 7. See Beth Gardiner, Jugaad Innovation: The Businesses Getting Creative in the Face of Scarcity, THE GUARDIAN (Dec. 3, 2013), http://www.theguardian.com/sustainable-business/jugaad-innovation-business- creativity-scarcity (describing how innovation tends to happen when businesses face scarcity of resources) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 8. See id. (noting how entrepreneurs are often forced to cut costs dramatically to survive) 9. See What is Antarctica?, NASA (Dec. 8, 2010), https://www.nasa.gov/audience/forstudents/k-4/stories/what-is-antarctica- k4.html (describing the size and value of Antarctica) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). PRIVATIZATION OF ANTARCTICA 381 krill, the development of Antarctica could change the playing field of international trade in a huge way. Yet, for decades, it has really just sat there, unproductive, unyielding, undeveloped and unpopulated.10 This is a direct result of the international politics that stifle Antarctica in a complicated political limbo. Conflicting political interests and policies make it difficult for a decision to be made on this landmass that pleases all the parties involved.11 There is huge potential in the Antarctic continent and to understand how to best access it, we must look at different paths. An approach through privatization would certainly result in better resource exploitation and care of the continent than that given by political bodies that seek their own interest at the expense of others.12 Through free enterprise, Antarctica would be subjected to market forces that would determine the best ways to reach equilibrium of sustainability and exploitation, as well as benefitting humanity as a whole. 13 The privatization of Antarctica is a concept that requires a good understanding of history, Antarctic resources, and the concept of ownership. In Section II of this paper we discuss the history of Antarctica. 14 Section III is devoted to an examination of the resources offered by this continent that might serve as the basis for homesteading.15 Finally, Section IV deals with criticisms of this Article’s proposal.16
10. See id. (noting that Antarctica is too cold for people to live there a long time, and huge swaths of the continent are uninhabitable). 11. See Antarctica, THE WORLD FACTBOOK, https://www.cia.gov/library/publications/the-world-factbook/geos/ay.html (last visited Apr. 19, 2015) (discussing how complex the politics of who controls Antarctica is, and how many claims are not universally recognized) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 12. See RICHARD W. MANSBACH & KIRSTEN L. TAYLOR, INTRODUCTION TO GLOBAL POLITICS 182 (2013) (describing the effects of privatization of state responsibilities). 13. See id. (noting that privatization often results in slashing costs). 14. See infra Part II and accompanying text. 15. See infra Part III and accompanying text. 16. See infra Part IV and accompanying text. 382 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
II. History
Antarctica existed only as a rumor about a mysterious southern landmass for quite a while.17 Whalers and sealers who dared go south in pursuit of prey found themselves in extremely cold, arid temperatures. 18 Throughout the sixteenth century, many of these men would make land claims and others would hide their discoveries from each other so as to obtain access to particular fishing locations.19 Interests in Antarctica were more focused on the waters around it than the actual landmass, an explanation of why very few people paid real attention to the continent.20 This situation made ownership more difficult, as no one individual could be said to have acquired any entitlement to the land.21 The explorers had no interest in claiming the land for themselves, and countries did not regard the claims as worthy of recognition.22 The actual discovery is greatly contested amongst the United States, Great Britain, and the former Soviet Union. 23 From the American Palmer, who supposedly made the first sighting in November 182024, to the Briton Bransfield who saw it
17. See STEPHEN MARTIN, A HISTORY OF ANTARCTICA (Rosenburg ed., 2013) (noting that the first European idea of the land was based on explanations of philosophers rather than actual exploration). 18. See M.J. PETERSON, MANAGING THE FROZEN SOUTH: THE CREATION AND EVOLUTION OF THE ANTARCTIC TREATY SYSTEM 32 (University of California, ed., 1988) (noting that human activity on the continent seemed impossible). 19. See id. (noting that these individuals preferred to settle disputes without getting others involved). 20. See id. at 31 (arguing that although the waters were more easily explored, the politics of the two entities have been connected). 21. See id. (describing how the government of the explorers would not follow up on any claims explorers made to the land). 22. See id. at 32 (revealing that “long distance and slow communication” made administration of the areas slow and costly—both reasons why the countries did not follow up on explorer’s claims”). 23. See DEBORAH SHAPLEY, THE SEVENTH CONTINENT 23 (Resources for the Future, Inc. ed., 1st ed. 1985) (noting that this battle over discovery has legal significance, “since discovery is sometimes considered a basis for territorial possession”). 24. See id. (noting that the American was from Stonington, Connecticut). PRIVATIZATION OF ANTARCTICA 383 on January of 1819,25 and to the Russian Imperial Navy officer Bellingshausen who supposedly saw it on 1819 (despite having no record of this year on his logs whatsoever)26 many explorers had claims on the territory that no country upheld.27 In the twentieth century, Antarctic interests evolved from sealing to whaling, until the point that stocks of the latter had been so reduced that the activity was no longer viable.28 In 1912, a series of expeditions to the South Pole began as part of a renewed interest in exploring the entire planet.29 This renewed interest in the area resulted in many governmental incursions.30 The first nation to view Antarctica with serious interest was Britain, which began compiling old historical logs, making claims on the territory named Graham.31 As their claims started to grow, French action began, claiming the Adelie Land. World War I put a halt to this process, but almost immediately after its conclusion, Great Britain tried to annex the entire continent into the British Empire.32 German expeditions prompted by Hitler on the hope of making claims triggered an international reaction by Norway and the Soviet Union, which also began enforcing their own claims.33 Argentina and Chile disputed islands and territory between their national territories and the South Pole, citing
25. See id. (stating that the British claim is hard to substantiate because the explorer’s logbook is lost). 26. See id. (detailing that this explorer even seemed to credit the American for discovering Antarctica). 27. See PETERSON, supra note 18, at 31 (stating that discovery of the continent did not start to matter until explorers actually landed and “wintered over” the interior of the continent). 28. See id., at 8–9 (noting that sealing died out after 1830 and whaling collapsed largely in the 1960s but some illegal and legal whaling still exists today). 29. See SHAPLEY supra note 23, at 11 (arguing that because the rest of the globe had been conquered, the Artic saw a burst of exploration in 1890). 30. See PETERSON, supra note 18, at 34 (noting that governments made claims to lands because of “discovery, later exploration, or geographical proximity”). 31. See id. at 33 (“Britain formally laid claims to all islands lying south of the 50°S between 20° and 80°W.”). 32. See id. (describing the land as a stretch of the Antarctic coast between 136° and 142°E). 33. See id. at 33–34 (noting that this decision led to claims based on the previous actions of British explores described previously). 384 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) geographic proximity and old agreements as their basis.34 Soviets claimed that by being the alleged first discoverers of Antarctica, the entire continent was theirs 35 Activities in the region ranged from exploitation of trade routes, water resources, strategic military placement, and preventive measures.36 Unlike North and South America or other continents, the ownership status of Antarctica remained unclear. 37 Because of the nature of the land, agriculture and homesteading on the land was difficult, making claims problematic and hard to enforce.38 Defining the ownership of Antarctica became a power struggle of political sluggishness and lack of private property rights. 39 Realizing the difficulties of actually settling disputes between rival governments, the United States proposed a trusteeship, with each country being able to exploit resources in Antarctica as it saw fit, with the United Nations giving a certain quantity of territory to all countries.40 This suggestion, however, was rejected quickly by all parties involved in the negotiations.41 This rejection was accompanied with fears that Antarctica could become its own independent state, which to all contending parties seemed undesirable (Peterson, 1988: 55).42 Colonialism may have disappeared from Africa and the Americas, but it appeared to be thriving in Antarctica.
34. See id. at 35 (arguing that claims by Norway and the United States spurred formal claims from Argentina and Chile). 35. See id. at 38 (relaying the USSR’s argument supported by propaganda that historical discoveries by Russian explorers gave the country the right to all of Antarctica). 36. See id. at 37 (describing the near clashes that occurred between various naval forces). 37. See id. at 36 (noting that the seven states who laid claim to the land felt as if the land was “open to appropriation” but some private individuals proposed that the land be administered by the League of Nations). 38. See id. at 31–32 (explaining that the inhospitable nature of the land turned governments away from enforcing claims on Antarctica). 39. See id. at 32–39 (discussing the varying claims and debates surrounding ownership and use of Antarctica by a variety of nations) 40. See id. at 37 (explaining the origination of the idea of a trusteeship as a way to avoid conflict between the United States’ allies in Great Britain and South America). 41. See id. (describing the near immediate rejection of the U.N. trusteeship proposal). 42. See id. at 54–56 (explaining why each participant disfavored several options for creation of law on Antarctica). PRIVATIZATION OF ANTARCTICA 385
On one side, there was the concept of Terra Nullis, which claimed Antarctica as a political no-man’s land, the property of whoever found and administered the territory. 43 All original claimants of Antarctica supported this view.44 On the other hand, many other countries that had no connection whatsoever with the continent favored res communis, the land of all of humanity, which is similar to the ownership of the oceans.45 After much debate, Chile suggested halting all arguments on claims of ownership and, instead, refocusing efforts on the peaceful development of scientific research. 46 This plan was adopted and revised by the United States delegation and a treaty was signed by twelve nations in 1959.47 It was enacted in 1961.48 Article IV Section 2 of the Antarctic Treaty demonstrates that its focus is on putting all claims and disputes on hold for an unspecified period of time while using the continent for scientific research only:
“No acts or activities taking place while the present Treaty is in force shall constitute a basis for asserting, supporting or denying a claim to territorial sovereignty in Antarctica or create any rights of sovereignty in Antarctica. No new claim, or enlargement of an existing claim to territorial sovereignty in Antarctica shall be asserted while the present Treaty is in force.”49
43. See id. at 36 (explaining that terra nullius permitted open appropriation for any state administering the territory). 44. See id. (identifying the seven original claimants to Antarctica that supported terra nullis). 45. See id. (defining res communis as common land that is shared by all). 46. See id. at 38 (describing the Chilean proposals that led to the first international “gentlemen’s agreement” for scientific research for a designated period of time). 47. See id. at 41 (identifying the twelve signatory states to the Atlantic Treaty). 48. See id. (explaining that the treaty came into effect after the last of the twelve signatory states ratified the treaty). 49. The Antarctic Treaty, art IV, Dec. 1, 1959. 386 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
The number of signatories grew from twelve to fifty-one because the Treaty allowed any member of the United Nations to accede to it.50 The treaty is vague regarding ownership or what is to be done if resources are more plentiful than is currently known. Its purpose is mostly to ensure peaceful cooperation by denigrating ownership issues. 51 Mineral and fossil fuel extractions were forbidden to preserve Antarctica in its original condition.52 No military development of any kind is allowed. 53 As shown in Picture 1, the Antarctic Treaty maintains the status quo of Antarctic land ownership with seven territorial claims made by Argentina, Australia, Chile, France, New Zealand, Norway, and the United Kingdom.54 Argentina, Chile, and the United Kingdom have overlapping claims. 55 The United States and Russia, the nation taking the role of the former Soviet Union, maintain a “basis of claim”.56 In addition to the treaty, the Madrid Protocol (1991), formally known as the Protocol on Environmental Protection to the Antarctic Treaty, designates Antarctica as a wilderness area.57
50. See The Antarctic Treaty, SECRETARIAT OF THE ANTARCTIC TREATY, http://www.ats.aq/e/ats.htm (last visited Apr. 19, 2015) (“The total number of Parties to the Treaty is now 52.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 51. See PETERSON, supra note 18, at 41 (explaining the principles of the Antarctic Treaty). 52. See Rick Rozzof, Scramble For World Resources: Battle For Antarctica, GLOBAL RESEARCH, May 16, 2009, http://www.globalresearch.ca/scramble-for-world-resources-battle-for- antarctica/13639 (describing the ban on exploitation of any resources from Antarctic except for scientific research) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 53. See id. (explaining that development and exploitation of Antarctica is limited to endeavors for peace). 54. See Antarctica: Territorial Claims, Map 13567, AUSTRALIAN ANTARCTIC DATA CENTER, https://www1.data.antarctica.gov.au/aadc/mapcat/display_map.cfm?map_id=135 67 (last visited Apr. 19, 2015) (showing the territorial claims of the seven original claimants) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 55. See id. (showing the overlapping claims of several claimants). 56. See Antarctic Treaty, supra note 53 (explaining modern claims on Antarctica following the Antarctic Treaty). 57. See Protocol on Environmental Protection to the Antarctic Treaty, SECRETARIAT OF THE ANTARCTIC TREATY, http://www.ats.aq/e/ep.htm (last visited Apr. 19, 2015) (designating Antarctica as a “natural reserve, devoted to
PRIVATIZATION OF ANTARCTICA 387
FIGURE 1: National Claims to Antarctic Territory.58
III. Resources
At first glance, Antarctica appears to be an uneconomical landmass. Its surface is covered 98% in ice, has little vegetation, extremely cold temperatures, great winds, no rainfall, and
peace and science”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 58. Territorial Claims, supra note 54. 388 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) difficult terrain.59 It was that harshness that made the continent appear as a barren wasteland that drew little attention from explorers and governments. 60 Upon closer inspection, however, Antarctica’s true potential becomes apparent. Food may not be as available in Antarctica as in other continents, but its surrounding waters tell quite the opposite story. Because of the constant daylight during half the year, nutrient rich waters, and the flow of underwater currents, the Southern ocean has been estimated to be up to eight times more productive than the north Atlantic, giving it an amazing biomass.61 In fact, the stock estimates in 1996 projected around 4.83 million tons of krill in the waters off of East Antarctica alone.62 Antarctica’s biggest untapped resource could potentially be those tiny shrimplike creatures that exist in massive quantities off its coasts.63 Due to the high amount of protein they contain in their bodies, krill is the single largest protein mass on the planet.64 Their present use in Japanese and Russian meals is something that could be introduced to the rest of the world, providing a new, cheap food source that could potentially substitute for shrimp and other types of seafood in the global market.65 Currently, however, krill are being over-exploited as a
59. See Antarctica Fact File, UNITED KINGDOM NATURAL HISTORY MUSEUM, http://nhm.ac.uk/nature-online/earth/antarctica/antarctica-fact- file/index.html (last visited Apr. 19, 2015) (discussing the characteristics of the continent in general) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 60. See PETERSON, supra note 18, at 31–32 (explaining that the inhospitable nature of the land turned governments away from enforcing claims on Antarctica). 61. See SHAPLEY, supra note 23, at 115 (describing the immense krill resource available in the waters surrounding Antarctica). 62. See Timothy Pauly, et. al., Distribution and Abundance of Antarctic Krill (Euphausia superba) Off East Antarctica (80–150°E) During the Austral Summer of 1995/1996, 47 Deep Sea Research Part II: Topical Studies in Oceanography, 2465 (Aug. 2000) (identifying the number of krill estimated in an hydroacoustic survey in East Antarctica). 63. See SHAPLEY, supra note 23, at 115 (describing the immensity of the biomass of the krill in the Southern Ocean). 64. See id. at 113 (explaining the protein content of krill to be nearly 16 percent). 65. See W. Nigel Bonner, The Future of Antarctic Resources, 152 THE GEOGRAPHICAL J. 248, 253 (1986) (“Most Krill is caught by the USSR and Japan.”). PRIVATIZATION OF ANTARCTICA 389 result of fishing in international waters, an example of the tragedy of the commons. Patagonian toothfish is currently the most valuable of Antarctica’s sea produce at the moment. 66 It is a large fish, with fine white meat and few bones, fetching up to 10 dollars a kilo.67 These fish are very common in southern waters, yet illegal fishing and excessive commercial fishing has slowly reduced its numbers in recent years. 68 This problem also constitutes a tragedy of the commons, as the fish are depleted with no incentive to regenerate lost fish, as they are fair game to other fishermen. Antarctica has also been a historically great source of whale and seal products. 69 Most of these aquatic mammals migrate south to feed on the swarms of krill that surround Antarctica. 70 However, like the Patagonian toothfish, excessive whaling and sealing, both legal and illegal, has greatly reduced the numbers of these creatures. 71 This practice was greatly reduced due to near extinction. 72 A huge cap of ice that is pushing down the actual continent 600 feet underground covers Antarctica’s surface. It is estimated that Antarctica contains around 70% of the world’s fresh water.73 This massive water deposit is a market that, in the future, could be exploited once sufficient drilling and transportation technologies are developed. The uses for this could be commercial, agricultural, or even environmental. A single
66. See Dick Williams, A History of the Patagonian Toothfish Fishery, AUSTRALIAN ANTARCTIC MAGAZINE 47 (Spring 2001) (“Today the Patagonian Toothfish is the most valuable fishery in Antarctic or subantarctic waters.”). 67. See id. (explaining that the white flesh and few bones in Patagonian Toothfish lead to high market prices). 68. See id. (noting that illegal fishing around the subantarctic islands has been a large-scale problem since 1996). 69. See Bonner, supra note 65, at 253 (detailing the few living resources found in and around Antarctica). 70. See id. at 253 (noting that whales are a major predator of krill). 71. See id. at 252 (describing the history of the seal harvesting and whaling that has taken place in Antarctica). 72. See id. (highlighting the international legislation and regulations in place to prevent over-exploitation). 73. See id. at 250 (“The Antarctic contains approximately 70 per cent of the world’s supply of fresh water locked up in its ice-cap . . . .”). 390 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) iceberg, the Trolltunga, for example, had an area of nearly the size of Delaware, and could be a source of fresh water for nine times the annual requirements of the United States.74 When first discovered, explorers were surprised to find lumps of coal scattered throughout the ice, as these two substances are almost never found together. 75 In fact, the presence of any mineral was considered unusual. Geological studies have since then revealed the existence of a massive continent, Gondwana, which was composed of Antarctica, Australia, South America, and Africa. 76 These countries have many kinds of resources which suggests that the Antarctica too must be mineral rich. 77 Some pockets of resources have been found and deemed “commercially insignificant,” yet the amount of land surveyed for resources is analogous to “prospecting in an area the size of Delaware for clues to the mineral wealth of the United States and Mexico.”78 This gives a sense of perspective to the vast potential that could lie below the ice, and could serve as the basis for private property rights. Coal and iron are the most prevalent of the minerals found, with one of the largest reserves on the planet. 79 Along with this, various pockets of natural gas and petroleum have been found, sparking certain degrees of interest in them. 80 Yet they remain unexploited as a result of the Antarctic Treaty. 81 These resources could in effect lower global fuel prices, as well as shift coal production away from countries like China, the United States and India.
74. See F.M AUBURN, ANTARCTIC LAW AND POLITICS 32 (Ind. Univ. Press Bloomington, 1st ed. 1982) (providing one example of a large tabular berg composed of mostly fresh water). 75. See SHAPLEY, supra note 23, at 5 (questioning how coal and ice could coexist). 76. See Bonner, supra note 65, at 249 (providing an overview of the former supercontinent). 77. See id. (connecting the presence of minerals on the supercontinent derivatives). 78. See SHAPLEY, supra note 23, at 127. 79. See id. at 249 (hypothesizing that the Antarctic might contain the largest coalfield in the world). 80. See id. (noting that layers of sediments associated with oil deposits have been found). 81. See id. at 255 (explaining that the Antarctic Treaty keeps Antarctica a ‘continent for science’ for the benefit of the greatest number of people). PRIVATIZATION OF ANTARCTICA 391
The year 1973 was a big one for Antarctic fossil fuels.82 It included a rise in Middle Eastern oil prices as well as a discovery of hydrocarbons by the accidental drilling of a scientific U.S. ship. Antarctic oil reserves are hard to accurately calculate, but there are approximately 45 billion barrels of oil in West Antarctica alone.83 This oil deposit might equal the production of the U.S. Atlantic continental shelf. Still, in a world where fear of oil depletion still haunts some, Antarctica could potentially be nestled on large reserves. This belief is also coupled with several hydrocarbon findings, which make Antarctica potentially one of the world’s biggest untapped oil sources. Prospecting combined with improvements in better extraction techniques could enable us to more accurately assess future prospects of oil production.84 Antarctica’s location in the south, a convergence point for the Indian, Atlantic and Pacific oceans, gives it a key location for accessing various landmasses. Were technology to advance to a point where Antarctica could actually be used as a settlement or trade area, the flow of products across the world could radically change. The most important thing, however, is that human creativity could come up with new ways to exploit the Antarctic continent and extract resources from it in ways that today seem impractical or beyond the scope of current human ability.85 The major challenge in Antarctica is not weather, or skills, or technology; rather, it is to fix the political system so that private property rights can be respected.86
82. See id. at 125 (explaining that the treaty powers moved to both claim jurisdiction and prioritize preservation in Antarctica in 1973). 83. See id. (stating that there is little known of what lies under the surface and waters surrounding Antarctica). 84. See id. (highlighting the fact that using Antarctica’s natural resources can boost world oil production). 85. See id. (noting the melting of the Arctic Ice cap, with new nuclear boats opening their way through the ice between Russia, China, and other northern countries). The Antarctic Treaty does not allow for or even contemplate a market economy to internalize cost and benefits of the melting of the Arctic Ice cap. See id. 86. See Paul Lincoln Stoller, Comment: Protecting the White Continent: Is the Antarctic Protocol Mere Words or Real Action?, 12 ARIZ. J. INT’L & COMP. LAW 335, 336 (1995) (outlining the numerous problems associated with Antarctica and how these problems led to the adoption of the Antarctic Treaty). 392 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
IV. Criticisms
Antarctica is currently at a standstill, and this is the result of the nature of politics and governments worldwide. 87 Antarctica’s current level of stagnation is a direct result of government mismanagement, which seeks to retard resource exploitation. 88 This government mismanagement consists of abuse of jurisdiction to prevent people from claiming parts of Antarctica, coalitions to prevent countries from entering the markets, the desire to prevent expansion by other nations, and the overall inefficiency to determine what to do with Antarctica is a result of government officials who seek to pursue their own interests.89 An example of this is the American attempt to divide Antarctica, which was summarily rejected due to political tensions.90 Instead of allowing economic freedom, governments use their political weight to prevent others from trying to compete.91 Another example was the refusal to accept any type of treaty that could have resulted in a separate sovereign state.92 This was quite hypocritical as many of the countries, including the United States, were colonies that later became independent. For decades, Antarctica has remained static while its resources, which could be used for the benefit of all humanity, remain untouched.93 Instead, the fifth largest continent is used
87. See Rozzof, supra note 52 (discussing historical territorial claims made by different countries). 88. See id. (giving the current political structure in Antarctica, which limits it to scientific endeavors). 89. See id. (limiting what countries can do in Antarctica). 90. See MARIE JACOBSSON, BUILDING THE INTERNATIONAL LEGAL FRAMEWORK FOR ANTARCTICA, at 4 http://www.atsummit50.org/media/book-5.pdf (providing background of previously proposed Antarctic plans for development) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 91. See ADRIAN JOHN HOSKINS, FROZEN EMPIRES: A HISTORY OF THE ANTARCTIC SOVEREIGNTY DISPUTE BETWEEN BRITAIN, ARGENTINA, AND CHILE, 1939–1959 172 (2008) (stating the different ways that countries used their influence to overrule previous treaty attempts). 92. See Rozzof, supra note 52 (describing the different attempts to privatize Antarctica). 93. See Bonner, supra note 65, at 249 (discussing different resources, including minerals and oil, that are present in Antarctica). PRIVATIZATION OF ANTARCTICA 393 only for research stations. 94 Is that really what is needed? Obviously, individuals, politicians, or even combinations of them can’t be certain. Markets, on the other hand, would best determine the proper allocation between mining companies and research stations as they do for every other good and service.95 Private property rights better determine resource usage. Have we learned nothing for the economic disarray of East Germany, Cuba, the U.S.S.R? These lessons are not being applied to Antarctica. 96 Competition would ensure that those who waste resources go out of business, that pollution would be internalized to prevent legal action and that innovation to differentiate products would actually be brought forth. Lack of ownership in Antarctica has already had damaging effects on the environment.97 Due to the unusual status of maritime claims around the land as a result of riparian law, there has been a tremendous abuse of fish, whales, and seals to the point that extinction was a real threat. 98 Attempts at regulation of the harvest of these creatures have proven ineffective, with declining populations resulting from both legal and illegal fishing.99 Without private ownership, there is little or no incentive to keep the animals alive, no way to farm them, and
94. See Stoller, supra note 86, at 338 (outlining the results that could occur through scientific research). 95. The Madrid Protocol, AUSTRALIAN ANTARCTIC DIVISION http://www.antarctica.gov.au/law-and-treaty/the-madrid-protocol (last visited Apr. 19, 2015) (outlining the limits of Antarctic claims and further limiting the 1595 Antarctica Treaty) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 96. See Rozzof, supra note 52 (describing the political problems that have arisen in relation to Antarctica). 97. See Christina A. Hoefsmit, Note and Comment: Southern Ocean Shakeup: Establishing Sovereignty in Antarctica and the Consequences for Fishery Management, 15 ROGER WILLIAMS U. L. REV. 547, 548 (describing the overall effect that the Antarctic political situation has had on the fish environment). 98. See id. (stating the risk that the environment faces due to this lack of enforcement). 99. See id. (highlighting the fact that the 1959 Antarctica Treaty does not extend to aquatic resources). 394 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) no reason to spare any to the competition.100 This situation puts the Antarctic biodiversity at great risk.101 There are many ways that this issue could be approached: governments could enforce their claims,102 the land could be split evenly among countries, 103 the continent could be opened to citizens of the world to homestead, 104 etc. The methods and approaches are numerous but privatization is an alternative that will not only yield better results, but the optimal ones. 105 Delineating private property can be done in several ways. The Lockean view, in which mixing labor with the land actually gives a person claim over the property, is ideal.106 In the case of Antarctica, this interpretation could be followed in some degree in an approach similar to the Homestead Act, either under a free Antarctica, or under different national claims.107 This might well center on resource extraction. 108 Technological developments
100. See id. (outlining problems that could result if this environment is not regulated in the future). 101. See id. (giving the possible solution that could occur to the local environment and providing a way to fix that problem). 102. See Christy Collis, Critical Legal Geographies of Possession: Antarctica and the International Geophysical Year 1957–1958, 75 GEO J. (NO. 4) 387, 389–91 (2010) (explaining one historical viewpoint of Antarctica as under territorial claim). 103. See id. at 392 (outlining another view of the Antarctic as terra communius being “a continent communally owned by every person on Earth”). 104. See Scott J. Shackelford, The Tragedy of the Common Heritage of Mankind, 28 STAN. ENVTL. L.J. 109, 112 (2009) (promoting the benefits of a homesteading system for international commons). 105. See id. at 168 (advocating that a form of privatization “would better promote economic growth, achieve optimal levels of pollution, reduce inefficiency, and modify the legal regime by responding to societal needs”). 106. See Walter E. Block & Michael R. Edelstein, Popsicle Sticks and Homesteading Land for Nature Preserves, 7 ROM. ECON. & BUS. REV. (No. 1) 7, 7 (2012) (“According to libertarian theory if private property rights are to be properly conferred on unowned virgin territory, it must be done through a process of homesteading.”); see also HANS-HERMANN HOPPE, THE ECONOMICS AND ETHICS OF PRIVATE PROPERTY: STUDIES IN POLITICAL ECONOMY AND PHILOSOPHY, 332 (2d ed., Ludwig von Mises Institute 2006) (“Every person owns his own body as well as all scarce goods which he puts to use with the help of his body before anyone else does . . . [which] implies the right to employ these scarce goods however one sees fit [without harming another] . . . .”). 107. See Shackelford, supra note 104, at 112 (suggesting “a modified leasehold system somewhat reminiscent of the Homestead Act”). 108. See id. at 119 (noting developing nations’ drive for “direct participation in the international management of resource extraction”). PRIVATIZATION OF ANTARCTICA 395 would aid this process.109 In the future, this could facilitate the habitation of Antarctica.110 A procedure similar to sea steading,111 an idea of creating nations on international waters, could facilitate privatization. An approach as this one would require that the nations with claims over the land declare this as res communis, however.112 A formal privatization can be an alternative to homesteading. There are four different methods of such privatization: direct sale, mass privatization, management- employee buyout, and restitution. 113 Privatization increases the role of the private sector and private property rights in the
109. See id. at 111 (“With resources becoming increasingly scarce and technology advancing to meet surging demand, longstanding principles of communal property in the international commons will either be reinterpreted or rewritten outright.”). 110. See British Antarctic Survey, Natural Environment Research Council, Living in Antarctica (describing currently established “comfortable living quarters, with living areas and bedrooms, a kitchen, offices, communication room, generator rooms and facilities” in Antarctica) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also Felicity Aston, Polar Vehicles Get Ice Traction, ENGINEERING & TECH. MAG. (Mar. 16, 2015) (finding it “far too comfortable to be proper polar exploring” as modern technology offered an Antarctic-capable vehicle with “a conveniently placed holder,” a “heated driver’s seat,” and “music on a six- speaker audio system”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 111. See Doug Bandow, Getting Around Big Government: The Seastead Revolution Begins to Take Shape, FORBES (Jul. 30, 2012) (defining “seasteading” as “living on a floating city outside of any country’s jurisdiction”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 112. See Shackelford, supra note 104, at 139 (“The legal status of Antarctica remains unsettled. It is not terra communis, since a number of states formally uphold their claims over sections of the continent.”) Shackelford indicates that a privatization effort such as he proposes would require “renouncement of all [state] territorial claims and a movement towards an internationalized regime.” Id. 113. See Oleh Havrylyshyn & Donal McGettigan, Privatization in Transition Countries: Lessons of the First Decade, ECON. ISSUES (No. 18) (International Monetary Fund, Aug. 1999), available at http://www.imf.org/external/pubs/ft/issues/issues18 (defining direct sale, mass privatization, management-employee buyout, and restitution); see also John Bennet, et. al, The Choice Of Privatization Method In A Transition Economy When Insiders Control A Firm, 23 EUROPEAN J. OF POL. ECON. 806, 806–07 (2007) (discussing methods of privatization for economies transitioning from communism to capitalism). 396 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) economy.114 Properly-defined and enforced private property rights are key ingredients of economic progress. 115 Privatization of Antarctica is an effective process of property transfer from the current status quo of no man’s land to the private sector (i.e., private business and private ownership).116 The modern concept of privatization is often associated with its implementation by Britain’s Prime Minister Margaret Thatcher in the early 1980s. 117 Facing dire economic conditions, the Thatcher government decided to sell state-owned companies to raise revenues and improve the efficiency of state-owned enterprises. 118 The success of the privatization of the British Telecom in 1984 made privatization a popular policy in the United Kingdom and across the world. 119 A series of successful
114. See id. (“Owners must be assured of the right to use assets, to decide on their use by others, and to profit from their use and sale.”). 115. See James Gwartney, et. al, Economic Freedom of the World: 2011 Annual Report, 6 (Fraser Inst. 2011) (“Protection of persons and their rightfully acquired property is a central element of economic freedom and a civil society. Indeed, it is the most important function of government.”); See also James Gwartney, et. al, Economic Freedom of the World 1975–1995, 27 (Fraser Inst. 1996) (“A legal structure that clearly defines property rights, enforces contracts, and provides a mutually agreeable mechanism for the settlement of contractual and property right disputes provides the foundation for a market economy.”). 116. See Shackelford, supra note 104, at 165 (“[F]ormalized property rights are . . . the starting point for sustained economic growth . . . [and with those rights,] the market would better promote economic growth, achieve optimal levels of pollution, reduce inefficiency, and modify the legal regime by responding to societal needs.”). 117. See Saul Estrin, The Impact of Privatization in Transition Economies, 2 (London Sch. of Econ. & Pol. Sci., Jan. 2007) (“[Privatization]has been a major activity for governments in both the developed and developing world since Mrs. Thatcher’s first modern privatization programme in the UK between 1979 and 1984.”) 118. See Richard Seymour, A Short History of Privatisation in the UK: 1979–2012, THE GUARDIAN, Mar. 29, 2012, http://www.theguardian.com/commentisfree/2012/mar/29/short-history-of- privatisation (“In response to the prolonged crisis of the 1970s, . . . [the Thatcher government] focus[ed] . . . on privatising already profitable entities to raise revenues and thus reduce public-sector borrowing.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 119. See Amy L. Chua, The Privatization-Nationalization Cycle: The Link Between Markets and Ethnicity in Developing Countries, 95 COLUM. L. REV. 223, 223 (1995) (“By the early 1990s, ‘at least eighty-three countries were conducting some significant form of privatization’ . . . .”); see also Maxwell O. Chibundu, Law and the Political Economy of Privatization in Sub-Saharan
PRIVATIZATION OF ANTARCTICA 397 privatizations between the late 1980s and the early 1990s greatly reduced the share of the public sector in the British economy.120 The Thatcher government started a wave of privatization copied across the world.121 Italy, France, Germany, and other European countries also launched privatization programs in the 1990s. 122 Asian countries including Japan and China followed suit.123 While the government involvement in China’s economy remains significantly large, small-scale privatization has been moving China’s economy towards capitalism since the 1970s. Latin American countries (i.e., Chile, Mexico, Brazil, and Guatemala) also used privatization for both political and economic purposes with different rates of success. 124 Sub- Saharan Africa remains a region with the lowest number of privatizations, while Antarctica is completely excluded from this market reform. 125 The most recent wave of privatization is
Africa, 21 MD. J. INT’L L. & TRADE 1, 10 (1997) (describing “the emergence of privatization as a global phenomenon . . . [substantially because of] Britain, and more specifically her combative former Prime Minister, Margaret Thatcher, [who] blazed the path”). 120. See Larry Elliott & Jill Treanor, A Whole World Sold on Sell- Offs, THE GUARDIAN, NOV. 21, 2000, http://www.theguardian.com/business/2000/nov/22/thatcher.politics1 (“In one stroke, the dead hand of the state was removed from the economy, unleashing a new spirit of enterprise and derring do.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 121. See Chibundu, supra note 119, at 11 (discussing privatization in Eastern Europe and Latin America). 122. See Organisation for Economic Co-operation and Development, Privatisation in the 21st Century: Recent Experiences of OECD Countries, Report on Good Practices, 6 (Jan. 2009) (detailing results of privatizations in France, Italy, Germany, Japan, Turkey, Netherlands, Australia, etc.). 123. See Robert W. Poole, Jr., Privatization, The Concise Encyclopedia of Economics, The Library of Economics and Liberty (2008), http://www.econlib.org/library/Enc/Privatization.html (“China, India, and numerous other developing countries continue to prepare and sell [state-owned- enterprises] . . . .”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 124. See William L. Megginson & Jeffrey M. Netter, From State to Market: A Survey of Empirical Studies on Privatization, 39(2) Journal of Economic Literature, 321, 325–26 (2001) (discussing how privatization has fared in various Latin American countries). 125. See id. at 326 (stating that few countries in sub- Saharan Africa have embarked on privatization programs). 398 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) associated with former communist countries in Europe and former Soviet states. 126 Privatization was a part of large reform in post-communist countries like Russia and the Czech Republic. 127 For former communist countries, privatization was a significant stepping stone towards capitalism and democracy.128 The main objectives of privatization in this area of the world were to create a private sector and to reduce the role of state in former command (i.e., state-controlled) economies.129 After the collapse of communism in 1989-1991, the former communist countries embarked on privatization that was mainly accomplished by three methods: mass privatization, management-employee buyout, and direct sale.130 Mass privatization was the most popular method among former communist countries.131 It allocates vouchers to eligible citizens for free or at nominal cost so that people can use them for share acquisition of state-owned assets (e.g., factories, land).132 The first mass privatization began in former Czechoslovakia in 1992. 133 Other post-communist countries followed the Czech model of privatization with slight variations. 134 Management- employee buyout, also popular among the post-communist countries, gives employees of state-owned enterprise certain privileges in the share acquisition of state-owned enterprise (i.e.,
126. See id. (“The last major region to adopt privatization programs comprises the former Soviet-bloc countries of central and eastern Europe.”). 127. See id. at 345 (noting that Russia and the Czech Republic underwent privatization after the fall of communism). 128. See id. at 326 (discussing the implications of privatization in formerly communist countries). 129. See id. (“These countries began privatizing SOEs as part of a broader effort to transform themselves from command to market economies.”). 130. See id. at 380 (describing the three types of schemes that governments generally use to effect privatization). 131. See id. at 326 (noting that many countries preferred the mass privatization method). 132. See id. (explaining the mechanics of the mass privatization method). 133. See id. at 360 (commenting that Czech privatization began in 1992). 134. See id. at 327–28 (discussing the trend towards mass privatization in Europe). PRIVATIZATION OF ANTARCTICA 399 exclusive buy-out rights or priority buy-out rights). 135 For example, in former Czechoslovakia privatization allowed all citizens to participate in the privatization of state-owned companies, while in Russia the government restricted privatization of state-owned enterprise only to managers and employees.136 Privatization does not have to be the deliberate sale of public assets to private owners. 137 It can also consist of a free conversion of public to private property. 138 A free give-away of public property to people has become associated with populist policies in former communist countries like Ukraine and Poland.139 Another example of free privatization is restitution. This is the process of returning public property to private ownership if the state-owned assets are acquired through expropriation of private property. 140 It allows only the original owners or their heirs to come to own state-owned property. Restitution, or reparations, is important for establishing essential governance norms such as government accountability, respect for the rule of law, trust in government, and protection of individual rights. 141 Nonetheless, restitution is an inappropriate method of privatization in the case of Antarctica because the lands were never privately owned.142 The empirical economic literature on the effect of privatization demonstrates that privately-owned enterprise performs better than government-owned enterprise (Megginson
135. See id. at 342–43 (explaining that direct asset sales may prefer certain investors to others). 136. See id. at 345 (providing an overview of the privatization programs in Czechoslovakia and Russia). 137. See id. at 339–40 (discussing various methods of privatization). 138. See id. at 339 (describing how voucher programs are used to distribute state owned assets at little or no cost to investors). 139. See id. at 345 (illustrating how voucher programs were used throughout Europe). 140. See id. at 339 (explaining how restitution operates). 141. See id. (implying that there are valuable policy reasons behind restitution). 142. See generally Walter Block, On Reparations to Blacks for Slavery, 3(4) Human Rights Review, 53 (2002); Wilton D. Alston & Walter E. Block, Reparations, Once Again, 9(3) Human Rights Review, 379 (2007). 400 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) and Netter, 2001). 143 One of these studies directly deals with the exploration of Arctic by using a sample of 35 government and 57 privately-funded expeditions to the Arctic from 1818 to 1901.144 Karpoff (2001) finds that the privately-funded expeditions performed better. 145 They made a larger number of major discoveries and technological innovations. 146 In contrast, government-funded expeditions incurred the most major losses.147 They lost more ships.148 They had higher rates of scurvy and crew deaths.149 The importance lies, however, on the final goal. An Antarctica that is free to develop its resources in conformity with the market and the needs of humanity would tend to lead to the development of better technologies in this regard. 150 Market forces will maximize the value of Antarctica and, hopefully, bring more resources to the people of the world.
V. Conclusion
We are not headed for a world without resources. That is far from the reality. If and when resources run low, their prices rise. This leads us to use our resources in smarter ways. We dig a little deeper. We make use of the resources we have and try to
143. See Megginson, supra note 124, at 380-81 (concluding that privatization generates a generally positive economic result). 144. See Jonathan M. Karpoff, Public versus Private Initiative in Arctic Exploration: The Effects of incentives and Organizational Structure, 109(1) J. OF POL. ECON., 38 (2001) (“From 1818 to 1909, 35 government and 57 privately funded expeditions sought to locate and navigate a Northwest Passage, discover the North Pole, and make other significant discoveries in Arctic regions.”). 145. See id. (summarizing that privately-funded expeditions tended to produce better results). 146. See id. at 40 (noting that privately-funded expeditions were generally more successful). 147. See id. at 38 (“Public expeditions were better funded than their private counterparts yet lost more ships, experienced poorer crew health, and had more men die.”). 148. See id. (stating that publicly funded expeditions lost more ships than privately funded expeditions). 149. See id. (“They made fewer major discoveries, introduced fewer technological innovations, were subject to higher rates of scurvy, lost more ships, and had more explorers die.”). 150. See Bonner, supra note 65, at 254 (implying that market forces are the most efficient driver of development in Antarctica). PRIVATIZATION OF ANTARCTICA 401 maximize their productivity. We use less of them. We look harder for substitutes. When the time comes to tap into Antarctica’s resources, the forces of supply and demand will decide how much oil is extracted, how effectively it will be used, and how pollution and research will be involved in the development of the territory. The privatization of Antarctica is something that will bring about benefits for everyone across the board. How we can accomplish this, politically, is unclear. Political interests run high, focused not on using resources but preventing others from doing so. The governments of the world do not pursue the betterment of mankind, but the betterment of flags, governments, and specific parties selected as a result of personal preference. Until we can rid ourselves from these biases, until world leaders recognize that privatization is the most effective way to exploit the continent, the situation will continue as it is: stagnant. This is a call to action, and one that people, not the government, must make.
Rising Seas, Receding Ethics? Why Real Estate Professionals Should Seek the Moral High Ground
Keith W. Rizzardi*
Abstract
Despite the scientific consensus, some political leaders in the United States deny the need for policy making in response to sea level rise. Even in coastal Florida and Virginia, where communities face acute risks of flooding and economic damage, the problem has been denied. Land use development and real estate professionals, when discussing the subject, have a responsibility to do better than our political leaders. In fact, the ethical codes of the professions – law, architecture, engineering, planning, real estate, and corporate compliance – all demand honesty. Material facts must be disclosed, and professionals cannot conceal truth, particularly if it leads to fraud or misconduct. Elsewhere on Earth, ethical considerations have influenced sea level rise policy. In the Netherlands, where major cities exist below sea level, political leaders confront the risks of a tragic flood. Dutch engineers have planned and designed projects and revised safety standards related to river widening, flood management, and salt-water intrusion and freshwater supplies. The low-lying Republic of the Marshall Islands also fears the loss of lands and lifestyles. But lacking the economic resources to protect themselves, the nation submitted a resolution to the United Nations decrying the threats created by the rising seas upon human rights to life, property, culture, food,
* Keith W. Rizzardi is a law professor at St. Thomas University in Miami Gardens, Florida, where he teaches environmental law and professional responsibility. A graduate of the University of Virginia and University of Florida, he has served as a trial attorney for the U.S. Department of Justice, a managing attorney for the South Florida Water Management District, and the director of a water law program in the Netherlands. He also has earned board certifications in state and federal administrative practice and in corporate compliance and ethics.
402 RISING SEAS, RECEDING ETHICS 403 housing, health and water. While public sector representatives wrestle with decisions to adapt to, mitigate for, or retreat from sea level rise, the private sector has a role to play. Corporations, by law, have rights and privileges; with them must come corporate social responsibility. Mere compliance with law is insufficient when a company’s real estate endeavors fail to protect human rights. Ethical behavior by the real estate professions and corporations means informing the people, partnering with the public sector leaders, protecting the public interest, and ensuring a resilient community with a sustainable future.
Table of Contents
I. Introduction ...... 403 II. Truth, Material Facts and Omissions: the Minimum Professional Standards...... 405 III. What is Truth, Anyway? ...... 413 A. Facts and Risks in South Florida ...... 416 B. Facts and Risks in Coastal Virginia ...... 423 C. Truth, Risk, Insurance and the Uncertainty Conundrum 427 D. Comparative Risk: Never Again vs. Caveat Emptor ...... 433 IV. Sea Level Rise and Human Rights...... 437 V. Taking the Higher Ground: Professionalism and Corporate Social Responsibility...... 441 VI. Conclusion ...... 449
I. Introduction
Despite a scientific consensus, the United States political leadership remains embroiled in a legislative and policy debate over the existence of sea level rise and the responses to it.1 Meanwhile, homeowners and businesses face real questions and serious risks when they make long-term investment decisions—
1. See Ryan McNeill, Deborah Nelson & Duff Wilson, As the Seas Rise, a Slow-Motion Disaster Gnaws at America’s Shores, REUTERS (Sept. 4, 2014, 1:00 PM), http://www.reuters.com/investigates/special-report/waters-edge- the-crisis-of-rising-sea-levels/ (describing congressional deadlock in the area of climate change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 404 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) including, significantly, whether and where to buy real estate.2 Rising seas will affect our human habitats, and our densely developed coastal communities provide the homes, workplaces, recreational opportunities, and governmental tax bases that drive our economies.3 The land use development and real estate professionals, when discussing these matters, have an ethical and moral responsibility to do better than our political leaders. Whether climate change is anthropogenic or natural is irrelevant. The data on and results of sea level rise cannot be ignored.4 Some places, of course, face greater risks than others.5 Due to its unusual geological features, including geographic subsidence that accelerates sea level rise, Coastal Virginia faces huge risks.6 Similarly, Miami-Dade County, Florida has more people living less than 4 feet above sea level than any U.S. state, except Louisiana.7 Rising seas threaten all these low-lying coastal communities.8 Nevertheless, these places continue to build and
2. See id. (identifying sea level change as one threat to the investment value of a home). 3. See id. (describing the economic importance of coastal communities). 4. Brian McNoldy, Water, Water, Everywhere: Sea Level Rise in Miami (October 3, 2014), http://www.rsmas.miami.edu/blog/2014/10/03/sea- level-rise-in-miami/ (“Like many low-lying coastal cities around the world, Miami is threatened by rising seas. Whether the majority of the cause is anthropogenic or natural, the end result is indisputable: sea level is rising and it is due to climate change. It is not a political issue, nor does it matter if someone believes in it or not.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 5. See Sea Level Rise in Hampton Roads: New Challenges for Bay Localities, VNLRI, at 3, available at http://www.virginia.edu/ien/vnrli/wp- content/uploads/2013/09/SLR-Final.pdf. (describing that Hampton Roads VA is sinking, exacerbating the effects of climate change on the coast) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 6. See id. (listing the effects of subsidence). 7. See Forbes Tompkins & Christina Deconcini, Sea-Level Rise And Its Impact On Miami-Dade County, 2014 WORLD RESOURCES INST. 3, available at http://www.wri.org/sites/default/files/sealevelrise_miami_florida_factsheet_final. pdf (noting that with the exception of Louisiana, Miami Dade county has the largest number of people living four feet above sea level) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 8. See Ben Strauss, Cities Below Future Seas, CLIMATE CENTRAL (July 29, 2013) (http://www.climatecentral.org/news/sea-level-rise-locking-in- quickly-cities-threatened-16296) (noting that sea levels could rise over twenty-
RISING SEAS, RECEDING ETHICS 405 grow, develop and redevelop, perhaps blissfully unaware of the risks ahead.9 Survey data in Florida shows that a majority of respondents believe that sea-level rise will not threaten their coastal property during their lifetime.10 This article explores the concepts of law, ethics, professionalism, and corporate social responsibility, applying them in the context of coastal land use development and real estate. Part II considers the ethical obligations of the various real estate professions and the client corporations, noting a common concern for honesty and disclosure to clients and third parties. Part III then discusses the laws and facts related to sea level rise, noting the special risks in the coastal communities of South Florida and Coastal Virginia. Part IV acknowledges the human rights implications of sea level rise, and ultimately, Parts V and VI suggest, as a solution, an embrace of ethics, professionalism, and corporate social responsibility by real estate and land use development professionals and corporations. In sum, in addition to openly discussing and disclosing the serious risks of sea level rise, corporations and individual real estate professionals should take an active role, confronting the challenges ahead by helping entire coastal communities to adapt.
II. Truth, Material Facts and Omissions: the Minimum Professional Standards.
Coastal development is an interdisciplinary human activity. Investments are made, finances secured.11 Lands are three feet in the future) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 9. See KEVIN WOZNIAK, GARIN DAVIDSON, & THOMAS ANKERSEN, FLORIDA’S COASTAL HAZARDS DISCLOSURE LAW: PROPERTY OWNER PERCEPTIONS OF THE PHYSICAL AND REGULATORY ENVIRONMENT WITH CONCLUSIONS AND RECOMMENDATIONS 38 (2012), available at http://nsgl.gso.uri.edu/flsgp/flsgps12001.pdf (finding that the coastal populations are unaware of the issues presented by coastal development in the listed communities) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 10. See id. at 33 (listing the findings of a study in which 78.8 percent of respondents said that they did not believe their property would erode). 11. See Karen Demasters, Rethinking that Beachfront Property, FINANCIAL ADVISOR (Oct. 1, 2005), http://www.fa-mag.com/news/article-
406 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) modified, waters managed.12 Permits are obtained, landscapes or buildings constructed.13 The whole enterprise requires the collective effort of corporations and their highly trained employees such as lawyers, planners, engineers, real estate, and compliance professionals.14 All of these professions have ethical codes, too.15 The codes establish essential duties of each profession.16 Of special significance, these professional duties are not limited to clients.17 Again and again, the various ethical codes all make it clear that honesty—to everyone—is expected.18 Material facts must be disclosed and professionals cannot participate in the concealment of truth, particularly if it leads to fraud or misconduct.19 Florida lawyers, for example, must comply with Chapter 4 of the Rules Regulating the Florida Bar and the Rules of
1232.html (describing the financial aspects of beachfront property investment) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 12. See SOUTH CAROLINA DEP’T OF HEALTH AND ENVTL. CONTROL, SOUTH CAROLINA GUIDE TO BEACHFRONT PROPERTY: INSIGHT FOR INFORMED DECISIONS 11 (Nov. 2014), available at www.sdhec.gov/library/CR-003559.pdf (listing the requirements for landowners who wish to build on the coastline of South Carolina) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 13. See id. at 12 (describing the permits required for coastal construction in South Carolina). 14. See generally id. (overviewing what is required to develop coastal property in South Carolina). 15. See generally MODEL RULES OF PROF’L CONDUCT (2013) (ethical rules for lawyers); AICP CODE OF ETHICS AND PROF’L CONDUCT (2009), https://www.planning.org/ethics/ethicscode.htm (ethical rules for planners) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); NSPE CODE OF ETHICS FOR ENGINEERS (2007), available at http://www.nspe.org/sites/default/files/resources/pdfs/Ethics/CodeofEthics/Code- 2007-July.pdf (ethical rules for engineers) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); NAT’L ASSOC. OF REALTORS CODE OF ETHICS (2012), http://www.realtor.org/mempolweb.nsf/pages/code (ethical rules for realtors) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 16. See infra notes 22, 28, and 29. 17. See infra note 34 (describing realtor duties to each other). 18. See infra notes 22, 28, and 29. 19. See infra note 22. RISING SEAS, RECEDING ETHICS 407
Professional Conduct,20 and Virginia lawyers must adhere to the Virginia State Bar Rules of Professional Conduct.21 Both systems of lawyer regulation are modelled after the American Bar Association’s Model Rules of Professional Responsibility.22 According to these ethical systems, lawyers are not merely advocates for their client’s desires; rather, the profession has a higher calling.23 A duty of truthfulness applies, requiring full disclosure and informed consent in dealings with clients and candor when dealing with the courts.24 Florida and Virginia also require lawyers to make affirmative disclosures to third parties and even opposing parties. For example, the Rules Regulating the Florida Bar, Rule 4-4.1, states that a lawyer may not “(a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client,” and Virginia’s parallel rule even omits the term
20. See generally RULES REGULATING THE FLORIDA BAR, RULES OF PROFESSIONAL CONDUCT (2014) [hereinafter FLORIDA RULES], available at https://www.floridabar.org/tfb/TFBLawReg.nsf/840090c16eedaf0085256b610009 28dc/4586762990367be185256e4300524284!OpenDocument (listing the professional responsibilities of lawyers who are members of the Florida Bar) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 21. See generally VIRGINIA STATE BAR RULES OF PROFESSIONAL CONDUCT [hereinafter VIRGINIA RULES], available at http://www.vsb.org/docs/2009-10-rpc.pdf (describing the professional responsibilities of Virginia Lawyers) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 22. See generally MODEL RULES OF PROF’L CONDUCT (2013) [hereinafter ABA RULES], (identifying professional duties of an attorney in the ABA). 23. See FLORIDA RULES, supra note 20, at Preamble (stating that a lawyer should “strive to attain the highest level of skill”); VIRGINIA RULES supra note 21, at Preamble (stating that lawyers should “strive to attain the highest level of skill”); ABA RULES supra note 22, at Scope (stating that a lawyer should act with a higher motivation than simple compliance with these rules). 24. See, e.g., VIRGINIA RULES, supra note 21, at Rule 1.6; and FLORIDA Rules, supra note 20, at Rule 4-1.6 (discussing implied, authorized, and adverse disclosures, even of otherwise confidential information, when required by law or court order, client fraud, auditors); VIRGINIA RULES, supra note 21, at Rule 3.3; and FLORIDA RULES, supra note 20, at Rule 4-3.3 (prohibiting false statements of fact or law to a tribunal, the failure to disclosure certain facts related to a criminal or fraudulent act by the client, the failure to disclose controlling legal authority, and offering or continuing to rely upon evidence that the lawyer knows to be false). 408 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
“material,” prohibiting “any false statement of fact or law.”25 While confidentiality is essential in the attorney client relationship, both Virginia and Florida recognize that an attorney might, at times, need to elevate a potentially harmful and unlawful decision to the organizational leadership.26 At some point, such as when a lawyer becomes embroiled as a participant in a client’s fraud or misrepresentations, the lawyer might even have a duty to withdraw from the representation.27 These lawyers can be involved in coastal development activities in any number of ways. At the beginning of the process, they might assist with obtaining zonings or variances for a parcel; at the end of the process, they might engage in review of the final contract for sale. But the entire process often begins with a different group of professionals, such as planners and architects, who create the vision and blueprints for a project and a community. The American Institute of Certified Planners, in its mandatory Code of Conduct, states that certified planners “shall not deliberately or with reckless indifference fail to provide adequate, timely, clear and accurate information on planning issues.”28 Meanwhile architects, working within the vision of the
25. FLORIDA RULES, supra note 20, at Rule 4-4.1. See VIRGINIA RULES, supra note 21, at Rule 4.1 (requiring “Truthfulness In Statements To Others,” stating that a lawyer may not knowingly “(a) make a false statement of fact or law; or (b) fail to disclose a fact when disclosure is necessary to avoid assisting a criminal or fraudulent act by a client.”). The commentary notes that Virginia found the term “material” to be redundant. Id. at Committee Commentary. Both states recognize that certain types of statements, such as estimates of price or value in negotiation, are not statements of fact, while emphasizing that a lawyer cannot contribute to a client’s crime or fraud or misrepresentation. Id. at Comment: Statements of Fact; FLORIDA RULES, supra note 20, at Rule 4-4.1 cmt.: Statements of Fact. 26. See VIRGINIA RULES, supra note 21, at Rule 1.13, (stating that a lawyer representing a corporation “shall proceed as is reasonably necessary in the best interest of the organization”); FLORIDA RULES, supra note 20, at Rule 4- 1.13 (stating the requirements of a lawyer in the event he discovers activity that could harm the corporation). 27. See, e.g., VIRGINIA RULES, supra note 21, at Rule 1.16, (stating that a lawyer may resign regardless of any material adverse effects on his client’s interests if the lawyer’s services perpetuate a crime or fraud); FLORIDA RULES, supra note 20, at Rule 4-1.16 (stating that a lawyer may withdraw representation is “the client has used the lawyer’s services to perpetuate a crime or fraud”). 28. See AICP CODE OF ETHICS AND PROF’L CONDUCT § B.1 (2009), https://www.planning.org/ethics/ethicscode.htm) (describing the rules of conduct
RISING SEAS, RECEDING ETHICS 409 planners, design structures and neighborhoods. According to the American Institute of Architects Code of Ethics and Professional Conduct, architects shall not counsel or assist a client in conduct that the architect knows, or reasonably should know, is fraudulent or illegal, nor engage in conduct involving the wanton disregard of the rights of others.29 Similarly, architects speaking in their professional capacity shall not knowingly make false statements of material fact.30 Eventually, the visions cast by the planners and the architects will become a reality, thanks, in part, to the engineers. Like the other professions involved in land use development and real estate, engineers also display little tolerance for untruths and misrepresentations. For example, the American Society of Civil Engineers Code of Ethics, states that Engineers uphold and advance the integrity, honor and dignity of the engineering profession by: (1) using their knowledge and skill for the enhancement of human welfare and the environment; (2) being honest and impartial and serving with fidelity the public, their employers and clients. 31 In addition, the Guidelines associated with Canon 1.a and 1.b. emphasize that “the lives, safety, health and welfare of the general public are dependent upon engineering judgments, decisions and practices incorporated into structures, machines, products, processes and devices,” and calls upon the profession to only approve documents “determined to be safe for public health and welfare in conformity with accepted engineering standards.”32 The civil engineering Code of Conduct,
for profession planners (on file with THE WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 29. See AM. INST. OF ARCHITECTS, CODE OF ETHICS & PROF’L CONDUCT, at Rules 2.104 and 2.106 (2012), available at http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aiap074122.pdf (instructing architects to avoid fraudulent activity) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 30. See id. at Rule 4.103 (“Members speaking in their official capacity shall not knowingly make false statements of material fact.”). 31. See AM. SOC’Y OF CIVIL ENG’R, CODE OF ETHICS, at Canons 1, 6 (2006), http://www.asce.org/code_of_ethics/ (describing the duties of a conscientious civil engineer) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 32. Id. at Canon 1(a)–(b). 410 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Canon 6, further notes that the profession shall act with “zero tolerance for bribery, fraud, and corruption.”33 Finally, someone will sell the property. According to the National Association of Realtor’s Code of Ethics, once again, honesty is essential.34 Article 1 provides that realtors have an obligation “to treat all parties honestly,” including, of course, their client.35 Article 2 says realtors “shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”36 While realtors are not obligated to possess expertise in other professional or technical disciplines, Standard of Practice 2-1 does require them to “discover and disclose adverse factors reasonably apparent to someone with expertise in those areas required by their real estate licensing authority.”37 In Florida, for example, the Natural Hazards Disclosure law requires the seller or seller’s agent to disclose property that is located in flood hazard zones,38 and a case for fraud and malpractice can be based upon the failure to disclose flood risks.39 In Virginia, realtors also have a duty to
33. Id. at Canon 6. 34. See NAT’L ASSOC. OF REALTORS, CODE OF ETHICS, Art. 1 (2012), http://www.realtor.org/mempolweb.nsf/pages/code (recognizing a duty for realtors to “treat all parties honestly”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 35. See id. (acknowledging that realtors have a primary obligation to their clients, but also that all parties must be treated with honesty). 36. Id. Art. 2. 37. See id. Art. 2, Standard of Practice 2-1 (requiring that realtors identify obvious deficiencies with the property for their clients). 38. See FLA. STAT. § 161.57 (2006) (requiring sellers to inform purchasers if the real property is in a coastal area “subject to frequent and severe fluctuation”); see also KEVIN WOZNIAK, GARIN DAVIDSON & THOMAS ANKERSEN, FLORIDA’S COASTAL HAZARDS DISCLOSURE LAW: PROPERTY OWNER PERCEPTIONS OF THE PHYSICAL AND REGULATORY ENVIRONMENT WITH CONCLUSIONS AND RECOMMENDATIONS 8 (July 2012), available at http://nsgl.gso.uri.edu/flsgp/flsgps12001.pdf (noting that sellers must notify buyers if the property is in a coastal construction control line) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 39. See Kaplan v. Kimball Hill Homes Fla., Inc., 915 So.2d 755, 761 (Fla. Dist. Ct. App. 2005) (affirming the trial court’s order granting the motion to compel arbitration on fraud and fraudulent inducement claims, where the Kaplans alleged that Kimball Hill failed to disclose pertinent facts concerning water runoff and drainage from adjacent property onto the homesite). RISING SEAS, RECEDING ETHICS 411 disclose the physical condition of a property, including a history of periodic flooding.40 The ethical mandates must be followed in order for professionals to maintain their licenses and credentials. But these professionals also work in and for corporations and organizations that often have another group of employees— compliance professionals—whose job is to help the corporations ensure that they follow all of the governing applicable requirements and rules of law.41 Companies are expected to implement and enforce robust compliance programs.42 If a company fails to implement such a program, and then violates the law, federal prosecutors will hold the companies and the
40. See Walton v. Aguiliar, Case No. 2010-106, at 3 (16th Jud. Cir. Oct. 28, 2010) (citing Virginia Code § 54·.1-2131(B)), available at http://blog.tarleyrobinson.com/wp-content/uploads/2012/03/Walton-v_- Aguilar.pdf (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 41. See Compliance Professional, ASSOC. CERTIFIED FRAUD EXAMINERS, http://www.acfe.com/career-path-compliance-professional.aspx (last visited Apr. 21, 2015) (providing a job description for a compliance officer) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 42. See U.S. SENTENCING GUIDELINES MANUAL § 8B2.1 (2011), Effective Compliance and Ethics Programhttp://www.ussc.gov/guidelines- manual/2011/2011-8b21 (The principles of a successful compliance program have been separately set forth by the U.S. Sentencing Commission. Developed to identify certain measures expected of corporations and organizations, the first of the seven principles of self-policing is to establish standards and procedures to prevent and detect misconduct conduct.) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). The seven principles of an effective ethics and compliance program are (1) to establish standards and procedures to prevent and detect misconduct conduct; (2) to ensure that organizational leadership, including senior officers and boards, is knowledgeable of and oversees the compliance program; (3) to take reasonable efforts to exclude bad actors from managerial ranks; (4) to implement routine education communications and training programs; (5) to monitor, audit and evaluate the effectiveness of the program, in part by maintaining a confidential system for employee reporting of non-compliance; (6) to promote and enforce the program through appropriate incentives and disciplinary measures; and (7) to take reasonable steps to respond to and prevent misconduct when it occurs. Id.; see also Kwamina Williford & Daniel Small, Establishing an Effective Compliance Program: An Overview to Protecting Your Organization, ASSOCIATION OF CORPORATE COUNSEL (Jan. 25, 2013), http://www.acc.com/legalresources/quickcounsel/eaecp.cfm (correlating U.S. Sentencing Guidelines to corporate compliance programs) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 412 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) executives accountable.43 In addition, companies may have internal policies and procedures, developed and adhered to by those compliance professionals.44 According to the minimum ethical standards set forth in the Rules of Conduct by the Society for Corporate Compliance and Ethics, truthfulness is paramount.45 The first two Rules of Conduct provide that compliance professionals “shall not aid, abet or participate in misconduct” and “shall take such steps as are necessary to prevent misconduct by their employing organizations.”46 When investigating and reporting misconduct, compliance professionals are further required to pursue their professional activities “with honesty, fairness and diligence.”47 But when wrongdoing is discovered, the compliance professionals, like their attorney counterparts, possess a responsibility to escalate the matter to the highest governing body, to consider resigning, and to report the problem to public officials when required by law.48
43. See, e.g., Scott Schools, DOJ Confirms, Once Again, That Compliance Plans Really Do Matter, LAW.COM (Mar. 31, 2014), http://www.law.com/sites/scottnschools/2014/03/31/doj-confirms-once-again-that- compliance-plans-really-do-matter/#ixzz3IgoREB84 (citing a speech by former head of the DOJ Criminal Division, Acting Assistant Attorney General Mythili Raman recognizing that strict compliance programs are taken into account when the DOJ pursues fraudulent activity) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 44. See, e.g., SEC. INDUS. ASSOC.: COMPLIANCE AND LEGAL DIV., WHITE PAPER ON THE ROLE OF COMPLIANCE 4 (2005), available at http://www.sifma.org/uploadedfiles/societies/sifma_compliance_and_legal_societ y/role_of_compliance_white_paper%20%282%29.pdf (listing the responsibilities of compliance professionals in securities firms, including developing internal policies and procedures to comply with laws and regulations) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 45. See SOC’Y FOR CORP. COMPLIANCE AND ETHICS, CODE OF PROFESSIONAL ETHICS FOR COMPLIANCE AND ETHICS PROFESSIONALS, at Rule 3.1, available at http://www.corporatecompliance.org/Portals/1/Users/169/29/60329/SCCE%20Co de%20Of%20Ethics-English.pdf (stating that compliance and ethics professionals should “pursue their professional activities, including investigations of misconduct, with honesty, fairness, and diligence”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 46. Id. at Rules 1.1, 1.2. 47. Id. at Rule 3.1. 48. See id. at Rule 1.4 (describing the duties of a compliance professional when there is misconduct). RISING SEAS, RECEDING ETHICS 413
In sum, for many professions, truthfulness is an essential part of their ethical codes. But when it comes to sea level rise and coastal development, our real estate professions have lost sight of the boundaries between and demands of law, truth, and ethics.
III. What is Truth, Anyway?
As a matter of federal case law, the risks of sea level rise for coastal communities have been acknowledged, though not necessarily fully adjudicated.49 In Massachusetts v. EPA,50 the Supreme Court—albeit, sharply divided—held that “the rise in sea levels associated with global warming has already harmed and will continue to harm Massachusetts. The risk of catastrophic harm, though remote, is nevertheless real.”51 Congress has acknowledged sea level rise, too.52 The Global Climate Protection Act of 1987 recognized the potential for increased temperatures, altered weather patterns, and agricultural productivity, and “thermal expansion of the oceans and partial melting of the polar ice caps and glaciers, resulting in rising sea levels.”53 Moreover, the U.S. Environmental Protection Agency, in its findings associated with a Clean Air Act rulemaking exercise on whether greenhouse gases endangered public health, explained that evidence of adverse impacts in the areas of water resources, sea level rise, and coastal areas were of special concern to current and future generations.54 EPA further
49. See infra note 51 (identifying cases in which sea level rise was considered by the reviewing court). 50. 549 U.S. 497 (2007). 51. See id. at 526 (describing why the Supreme Court held that Massachusetts had standing to sue the EPA); see also, Green Mountain Chrysler Plymouth Dodge Jeep v. Crombie, 508 F. Supp. 2d 295, 316–17 (D. Vt. 2007) (concluding that uncertainty was not a basis for rejecting the expert testimony of NASA scientist Dr. James Hansen, and stating that “[t]he unprecedented nature of current human-made forcing means that history is not a perfect guide. However, that the situation is unprecedented does not mean that scientists may not testify reliably as to global warming’s likely effects.”). 52. See Global Climate Protection Act, Pub. L. No. 100–204, § 1102, 101 Stat. 1407, 1408 (1987) (developing an action plan for addressing climate change). 53. See id. (describing the possible causes of global warming and the studies being conducted by the government). 54. See Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act, 74 Fed. Reg. at
414 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) noted that the “most serious potential adverse effects are the increased risk of storm surge and flooding in coastal areas from sea level rise and more intense storms.”55 Other federal agencies, including the Army Corps of Engineers, Global Climate Research Program, National Academy of Sciences, the National Research Council, and the U.S. Navy, have echoed EPA’s concerns.56 Many of these agencies also cite the Nobel Prize-winning work conducted by the Intergovernmental Panel on Climate Change (“IPCC”), a multinational scientific body organized under the auspices of the United Nations.57 The IPCC Forth Assessment Report considered thermal expansion of the ocean, changes in salinity and ocean density, glacial and ice cap melting, and the effects on surface temperatures and precipitation, all while attempting to account for a dynamic climate system.58 In 2013, an updated IPCC report on sea level rise increased the estimates for sea level rise in this century,59 and concluded that “[i]t is
66,498 (Dec. 15, 2009) (to be codified at 40 C.F.R. pt. 1) (identifying coastal areas as those most obviously at risk in climate change scenarios). 55. See id. at col. 2 (looking at current trends associated with stronger storms and deeper storm surges and predicting increased damage to coastal communities) 56. See Keith W. Rizzardi, Sea Level Lies: The Duty to Confront the Deniers, 44 STETSON L. REV. 75, 98–101 (2014) (summarizing various government documents on sea level rise). 57. See generally INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, UNDERSTANDING CLIMATE CHANGE: 22 YEARS OF IPCC ASSESSMENT (2010) (explaining the structure of the IPCC and summarizing the reports and progress made since its inception), available at https://www.ipcc.ch/pdf/press/ipcc_leaflets_2010/ipcc- brochure_understanding.pdf (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). Over time, the IPCC has issued four reports (1990, 1995, 2001, and 2007), and “[t]housands of scientists and experts from all over the world contribute to the preparation of IPCC reports as authors, contributors, review editors and expert reviewers; none of them paid by the IPCC.” Id. at 2, 5–7. 58. See id. Gerald A. Meehl et al., Global Climate Change Projections, in CLIMATE CHANGE 2007: THE PHYSICAL SCIENCE BASIS747, 812–816 (Susan Solomon et al. eds. 2007), available at http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-chapter10.pdf (addressing sea level change in the Twenty-First Century) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 59. See John A. Church et al., Sea Level Change, in CLIMATE CHANGE 2013: THE PHYSICAL SCIENCE BASIS 1137, 1140 (T.F. Stocker et al. eds. 2013), available at http://www.ipcc.ch/pdf/assessment- report/ar5/wg1/WG1AR5_Chapter13_FINAL.pdf (addressing sea level rise
RISING SEAS, RECEDING ETHICS 415 virtually certain that global mean sea level rise will continue beyond 2100, with sea level rise due to thermal expansion to continue for many centuries.”60 The report also emphasized that risks are localized because sea level change will have strong regional patterns.61 But the IPCC report has also been criticized as too conservative, because it failed to take into account critical tipping points, such as the potential melting of the Greenland ice cap.62 Recognizing the federal law and the evidence, states have passed laws related to sea level rise, too.63 To adapt to sea level rise, communities will eventually need to implement a combination of four techniques: protection (defensive structures such as shoreline armoring or beach renourishment); accommodation (such as altered design of stormwater and flood control systems to reduce risks); managed retreat (including removal or relocation of developments); or avoidance (preventing development in places subject to future risks).64 A vast number of decisions will need to be made, in both the public and private sectors, and an equally vast amount of money will be needed to implement these decisions. Inevitably, laws and appropriations passed by state legislators must follow. Yet the evidence overwhelmingly shows that management of sea level rise necessitates an exercise in risk projections) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 60. Id. 61. See id. (“It is very likely that in the 21st century and beyond, sea level change will have a strong regional pattern, with some places experiencing significant deviations of local and regional sea level change from the global mean change.”). 62. See JOHN ENGLANDER, HIGH TIDE ON MAIN STREET (2d ed. 2013). 63. See Rizzardi, supra note 56, at 88–93(summarizing various government documents on sea level rise and discussing statutes, executive orders, legislative resolutions, and regulations in California, Connecticut, Maryland, Massachusetts, Louisiana, New York, New Jersey, North Carolina, Rhode Island, and Washington). 64. See SOUTH FLORIDA REGIONAL PLANNING COUNCIL, ADAPTATION ACTION AREAS: POLICY OPTIONS FOR ADAPTIVE PLANNING FOR RISING SEA LEVELS 4–5 (Nov. 6, 2013), available at http://www.southeastfloridaclimatecompact.org/wp- content/uploads/2014/09/final-report-aaa.pdf (describing four main adaptation strategies) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 416 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) assessment and a plan for action.65 Waters are rising and with the floods will come physical risks to our buildings, our transportation infrastructure, our drinking water systems, and our sewage treatment systems. Sea level rise represents a fundamental paradigm shift, sometimes called the “death of stationarity” by water managers.66 Old data is no longer representative and the once in one hundred year event may prove to be a far more frequent occurrence.67 In other words, for low lying coastal communities, the rare floods could become commonplace. Hard decisions will need to be made. Which places will society protect and which ones will we abandon? In considering these questions, the specific risks facing South Florida and Coastal Virginia deserve special note.
A. Facts and Risks in South Florida
In low-lying South Florida, despite vast evidence of rising seas68 and even with periodic tidal flooding triggering National Weather Service flood warnings,69 coastal development continues
65. See id. at 3–5 (noting effects of sea level rise and possible solutions). 66. See, e.g., P. C. D. Milly et. al., Stationarity Is Dead: Whither Water Management? 319 SCIENCE 573, 573–574 (Feb. 2008), available at http://www.sciencemag.org/content/319/5863/573.full (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 67. See Frances Moore, Debunking the Urban Legend of Climate Change, CLIMATE INSTITUTE, http://www.climate.org/topics/climate- change/debunking-climate-change-myths.html (last visited Apr. 22, 2015) (explaining that data based on satellite estimates of tropospheric temperature is now outdated) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 68. According to the University of Miami’s Rosenstiel School of Marine and Atmospheric Science, sea levels have trended upward as much as 2.5 inches during the period between 1996 and 2013. McNoldy, supra note 4 (“Simple linear trends drawn through annual averages of all high tides, low tides, and the mean sea level are shown below, and all three lines are about 4.5″ higher in 2013 than they were in 1996.”) 69. See High Tidal Levels Could Cause Minor Costal Flooding, EYES ON NEWS: SOUTH FLORIDA EDITION (Oct. 17, 2013), http://eyesonnews.com/high-tidal-levels-could-cause-minor-coastal-flooding (stating flooding from just high tide events has become more common and caused the National Weather Service to issue a coastal flood warning from a 2013 high tide event in Miami-Dade) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 417 to boom.70 Numb to the risks ahead, Florida passed the Florida Climate Protection Act in 2012, a law that repealed the state’s effort to address greenhouse gas emissions.71 Still, some measures to address sea level rise remain. Florida’s state land acquisition efforts are required to address the challenges of global climate change by providing opportunities to sequester carbon and to “otherwise mitigate and help adapt to the effects of sea level rise.”72 Local governments can define an “[a]daptation action area” to identify “one or more areas that experience coastal flooding due to extreme high tides and storm surge and that are vulnerable to the related impacts of rising sea levels for the purpose of prioritizing funding for infrastructure needs and adaptation planning.”73 In a 2013 report on the subject, the South Florida Regional Planning Council explained that this law provides a tool that can be used by local government to address a variety of policy options: zoning, floodplains, building codes, setbacks and buffers, coastal armoring, development and rebuilding conditions, transfers of development rights, utilities, fees, and assessments.74 Florida’s governor, unconvinced that the climate change is real,75 has largely left the task of responding to sea level rise and
70. See, e.g., Jeff Goodell, Goodbye, Miami, ROLLING STONE (June 20, 2013), http://www.rollingstone.com/politics/news/why-the-city-of-miami-is- doomed-to-drown-20130620 (commenting that Miami’s “skyline is crowded with construction cranes”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); Sea Level Rise or Not, Coastal Development in South Florida is Booming, HOMELAND SECURITY NEWS WIRE (Oct. 23, 2014), http://www.homelandsecuritynewswire.com/dr20141023-sea- level-rise-or-not-coastal-development-in-south-florida-is-booming (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 71. See H.R. 4001, 2012 Leg., Reg. Sess. (Fla. 2012) (repealing Florida’s efforts to implement climate change protections through a Department of Environmental Protection regulatory program in 2012). 72. See FLA. STAT. § 259.105(18)(d) (2014) (explaining what the Division of State lands must prioritize annually as a result of the Florida Forever Act). 73. FLA. STAT. § 163.3164(1) (2011). 74. See SOUTH FLORIDA REGIONAL PLANNING COUNCIL, supra note 64, 13–23 (discussing tools available to local governments to address climate change). 75. See, e.g., Mary Ellen Klas, Florida Scientists Press Gov. Rick Scott on Climate Change, TAMPA BAY TIMES (July 15, 2014), http://www.tampabay.com/news/politics/stateroundup/florida-scientists-press-
418 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) planning for adaptation action areas to local governments.76 But the state, through its Department of Economic Opportunity, has acknowledged that due to sea level rise, communities may experience an increase in coastal vulnerability, including “increased flooding and drainage problems, Destruction of natural resource habitats, [h]igher storms surge, increased evacuation areas and evacuation time frames, [i]ncreased shoreline erosion, [s]altwater intrusion, and [l]oss of infrastructure and existing development.”77 To deal with these severe threats, the Department offers guidance, planning tools, and even funding opportunities.78 Nevertheless, some counties continue to ignore the issue.79 The governments of Southeast Florida, however, are clearly aware of the risks ahead, as shown by the partnership gov-scott-on-climate-change/2188637 (noting Gov. Rick Scott’s noncommittal stance on climate change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 76. See, e.g., Chris Mooney, Forget “Bans” on Talking About Climate. These Florida Republicans are too Busy Protecting Their Coasts, WASH. POST (Mar. 31, 2015), http://www.washingtonpost.com/news/energy- environment/wp/2015/03/31/the-unlikely-group-of-republicans-who-are- preparing-florida-for-climate-change/ (discussing agreements between counties in Southeast Florida to address climate change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 77. See Apdaptation Planning (Adapting to Sea Level Change), FLA. DEPT. OF ECON. OPPORTUNITY, http://www.floridajobs.org/community- planning-and-development/programs/technical-assistance/community- resiliency/adaptation-planning (last visited Mar. 29, 2015) (highlighting methods of adapting to sea level change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT).
78. See id. (outlining methods for dealing with sea level change). 79. See, e.g., Steve Doane, Southwest Florida Governments Not Planning for Sea Rise, NEWS-PRESS.COM (August 2, 2014), http://www.news- press.com/story/news/2014/08/02/southwest-florida-governments-planning-sea- rise/13532083/ (noting a lack of preparation in Southwest Florida in response to rising sea levels) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); but see, Debra Kahn, San Francisco Bay Area Enacts Sea-Level Rise Policy (October 7, 2011), available at http://www.scientificamerican.com/article/san-francisco-bay-area-enacts-sea- level-rise-policy/ (stating the City of San Francisco passed a coastal development plan allowing the denial of permits in coastal areas susceptible to flooding. Based on state projections of 16 inches of sea level rise, as much as 180,000 acres of lands could be off-limits to development by 2050) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 419 between Monroe County (the Florida Keys), Miami-Dade County, Broward County (home to Fort Lauderdale) and Palm Beach County to create the Southeast Florida Regional Climate Change Compact.80 The Compact, signed in 2009, committed the four counties to participate in annual regional summit meetings, to work cooperatively to engage in legislative advocacy, and to share staff resources to create mitigation and adaptation strategies and a Southeast Florida Regional Climate Action Plan.81 In a sobering effort, the Compact participants carefully evaluated existing projections and scientific literature to develop a unified sea level rise projection for Southeast Florida, projecting one foot of sea level rise beyond the 2010 levels between 2040 and 2070, but noting that a two foot rise is possible by 2060.82 As the Compact Counties further explained in a vulnerability analysis, even just one foot of sea level rise brings consequences to hospitals, schools, power plants, and roads.83 Dangers increase as
80. See SOUTHEAST FLA. REG’L CLIMATE CHANGE COMPACT, http://www.southeastfloridaclimatecompact.org/ (last visited Mar. 29, 2015) (listing the members of the compact) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 81. See SOUTHEAST FLA. REGIONAL CLIMATE CHANGE COMPACT, WHAT IS THE SOUTHEAST FLORIDA REGIONAL CLIMATE CHANGE COMPACT?, available at https://southeastfloridaclimatecompact.files.wordpress.com/2014/05/compact-1- page-flyer-ia-final-sa.pdf (describing the formation of the Southeast Florida Regional Climate Change Compact) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 82. See SOUTHEAST FLA. REG’L CLIMATE CHANGE COMPACT TECHNICAL AD-HOC WORK GROUP, SOUTHEAST FLORIDA REGIONAL CLIMATE CHANGE COMPACT COUNTIES, A UNIFIED SEA LEVEL RISE PROJECTION FOR SOUTHEAST FLORIDA 6–7 (Apr. 2011), available at http://www.southeastfloridaclimatecompact.org//wp- content/uploads/2014/09/sea-level-rise.pdf (finding that a 24-inch increase in sea level is possible by 2060) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 83. See SOUTHEAST FLA. REG’L CLIMATE CHANGE COMPACT INUNDATION MAPPING AND VULNERABILITY ASSESSMENT WORK GROUP, ANALYSIS OF THE VULNERABILITY OF SOUTHEAST FLORIDA TO SEA LEVEL RISE 6–11 (Aug. 2012), available at http://www.southeastfloridaclimatecompact.org//wp- content/uploads/2014/09/vulnerability-assessment.pdf [hereinafter VULNERABILITY] (discussing separate areas of vulnerability in Southeast Florida) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). With only one foot of sea level rise, four hospitals, 65% of the schools and 71% of the emergency shelters in the Florida Keys are vulnerable, power plants properties in Miami-Dade and Broward are exposed, and more
420 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) the oceans rise. Responding to this risk analysis, the Compact Counties developed an action plan.84 The multi-layered plan recommends modifying existing legal structures and decision- making, drafting new local government policy documents, developing goals and progress indicators, coordinated, multi- disciplinary outreach and education programs, and processes for focused and prioritized investments.85 The efforts and projections made by the Compact counties should be considered by every coastal landowner and the professionals who work on coastal land use issues. Coastal flooding is an obvious risk. Historically, in South Florida, a 7-foot-high storm surge, such as the one seen in Miami- Dade County during Hurricane Wilma, had a likelihood of happening once every 76 years.86 However, if sea levels along Miami-Dade’s coast rise by just one foot, the same 7-foot storm surge will occur once every 21 years.87 If sea levels rise just over 2 feet, that surge could happen once every 5 years.88 And even without storm surges, the upper estimate of taxable property values vulnerable across the region is greater than $4 billion at just one foot, with values rising to over $31 billion at the 3 foot scenario.89
than 81 miles of roadway from Miami-Dade County to Palm Beach County are at elevations below sea level at the one foot scenario. See id. 84. See generally SOUTHEAST FLA. REG’L CLIMATE CHANGE COMPACT COUNTIES, A REGION RESPONDS TO A CHANGING CLIMATE (October 2012), available at http://www.southeastfloridaclimatecompact.org//wp- content/uploads/2014/09/regional-climate-action-plan-final-ada-compliant.pdf (reviewing the Southeast Florida Regional Climate Compact action plan) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 85. See id. at vi (noting the modes for implementing the policy recommendations). 86. See Tompkins & Deconcini, supra note 7, at3 (“The 7-foot-high storm surge in Miami-Dade County from Hurricane Wilma has a likelihood of happening once every 76 years”). 87. See id. (“If sea level along Miami-Dade’s coast rises by just over another foot, the same 7-foot storm surge would have a likelihood of occurring once every 21 years.”). 88. See id. (“If sea level along Miami-Dade’s coast rises slightly above 2 feet, the same 7-foot storm surge would have a likelihood of occurring once every 5 years.”). 89. See VULNERABILITY, supra note 83, at 6 (noting the value of taxable property at risk from rising sea levels). RISING SEAS, RECEDING ETHICS 421
In addition to the massive potential for flood damage to be done to homes and businesses, regional infrastructure is at risk, too. Of particular significance, water control structures could be damaged, and sewer systems and septic systems can be contaminated, creating serious risks to public health long after the storm event has passed.90 The canals and drainage systems that keep Florida’s low-lying lands dry will also be affected.91 Smaller storm events will flood yards, swales, and ditches along roadsides. Moreover, the roads are also designed to flood in larger storm events.92 But if the flood control system is damaged, rainfall from a series of small daily thundershowers will drain more slowly, accumulating on the roads just as a large storm would, and rendering community mobility difficult and, at times, impossible.93 In a 2009 analysis, the South Florida Water Management District, a multi-county governmental entity responsible for the management of the Central and Southern Florida Flood Control System, candidly explained these flooding risks, and more.94
90. See SOUTH FLA. WATER MGMT. DIST., CLIMATE CHANGE & WATER MANAGEMENT IN SOUTH FLORIDA 14–17 (Nov. 9, 2009), available at http://www.sfwmd.gov/portal/page/portal/xrepository/sfwmd_repository_pdf/clim ate_change_and_water_management_in_sflorida_12nov2009.pdf (noting potential implications for regional water treatment plants) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 91. See id. at 14 (noting the impact of sea level rise on canals). 92. See, e.g., SOUTH FLA. WATER MGMT. DIST., MANAGING FLOOD WATER BEFORE AND AFTER THE STORM, available at http://www.sfwmd.gov/portal/page/portal/xrepository/sfwmd_repository_pdf/bts_ before_after_storm.pdf (explaining how storms can affect roads) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 93. Cf. CCSP, IMPACTS OF CLIMATE CHANGE AND VARIABILITY ON TRANSPORTATION SYSTEMS AND INFRASTRUCTURE: GULF COAST STUDY, PHASE I. A REPORT BY THE U.S. CLIMATE CHANGE SCIENCE PROGRAM AND THE SUBCOMMITTEE ON GLOBAL CHANGE RESEARCH, DEPT. OF TRANSP., 445 (M. J. Savonis, V.R. Burkett, and J.R. Potter, eds., 2008); FLA. PLANNING AND DEV. LAB, Taking the High Road: Integrating Hazard Mitigation into Long Range Transportation Planning, FLA. STATE UNIV. http://fpdl.coss.fsu.edu/Research- Projects/Integrating-Hazard-Mitigation-into-Long-Range-Transportation- Planning (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 94. See Kim Shugar & Jayantha Obeysekera, Climate Change and Sea Level Rise Planning and Adaptation Strategies, SOUTH FLA. WATER MGMT. DIST. (Feb. 10, 2010), available at
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Flooding conditions could become particularly bad during hurricane season, as agency scientists have repeatedly explained to the regional water management leadership in public presentations.95 Sea level rise will force coastal flood control gates to close, to avoid the “negative flows” of salt water into the canal systems and aquifers.96 Closing the gates significantly reduces coastal spillway’s flood discharge capacity.97 While pumps may eventually be installed at some locations to move the water, regional drainage capacity will still be reduced and floods events will last longer.98 In addition to flood risks, temperature increases associated with climate change could also alter storm and rainfall patterns, resulting in droughts that raise the risks of fire, agricultural decline, and non-functional public water supply storage and well field systems.99 Rising seas will alter coastal wetlands and estuaries, changing the environment and coastal fisheries.100 Tropical storm and hurricane patterns will change, http://www.sfwmd.gov/paa_dad/docs/F2139791537/W%20Item%208A_Climate% 20Change%20District%20Update%20- %20J%20Obeysekera%20and%20K%20Shugar.pdf (outlining planning and adaptation strategies through a joint workshop with the Water Resource Advisory Commission) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 95. See id. at 3 (showing that storms and hurricanes as well as rising seas, increasing temperature, and changing precipitation, will affect regional water management leaders efforts concerning flood control, water supply, natural systems and water quality). 96. See id. at 10 (continuing the attempt by climate change scientist to educate policy makers on the effects of climate change on their localities). 97. See id. (highlighting the impact reduced flood discharge capacity as particularly harmful in the latter part of hurricane season). 98. See id. at 7 (charting the vulnerability of these coastal regions to increased flooding and providing several strategies for adapting to these dangers). 99. See generally UNITED STATES GLOBAL CHANGE RESEARCH PROGRAM, GLOBAL CLIMATE CHANGE IMPACTS IN THE UNITED STATES (Thomas R. Karl., J. M. Melillo, & T. C. Peterson eds., 2009) [hereinafter USGCRP], available at http://downloads.globalchange.gov/usimpacts/pdfs/climate-impacts- report.pdf (reporting to Congress on behalf of the National Science and Technology Council summarizing “the science of climate change and the impacts of climate change on the United States, now and in the future”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 100. See id. at 12 (listing the key findings of the comprehensive study on the impacts of climate change in the United States). RISING SEAS, RECEDING ETHICS 423 potentially becoming less frequent but more intense.101 Coastal drinking water supplies will be further impacted by accelerated saltwater intrusion as salt water seeps into the freshwater aquifers, jeopardizing drinking water supplies for the community.102 In sum, sea level rise presents a multi-layered problem, with no easy solutions.
B. Facts and Risks in Coastal Virginia
Similar difficulties lie ahead for Coastal Virginia. In the region, properties already experience floods. And, echoing the Florida experience, despite the floods, properties are rebuilt.103 Paralleling the Florida experience, Virginia’s legislators and policymakers have also been inconsistent and, at times, unrealistic about the threats posed by sea level rise.104 The
101. See id. at 24 (“Increases in tropical precipitation are projected during rainy seasons (such as monsoons)… Certain regions, including the U.S. West (especially the Southwest) and the Mediterranean, are expected to become drier. The widespread trend toward more heavy downpours is expected to continue, with precipitation becoming less frequent but more intense.”). 102. See id. at 12 (explaining how climate change will stress water resources); see also KRISTIN JACOBS, KATY SORENSON, GEORGE NEUGENT, & SHELLEY VANA, SOUTHEAST REGIONAL CLIMATE CHANGE COMPACT 1, available at https://www.broward.org/NaturalResources/ClimateChange/Documents/fourcou nty_compact.pdf (“[R]ising sea levels could limit the effectiveness of critical drainage infrastructure, endanger beaches, and coastal natural resources and increase incidents of saltwater intrusion on the Biscayne Aquifer – putting at risk the drinking water supply for the entire population of Southeast Florida”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 103. See Wendy Koch, Rising Sea Levels Torment Norfolk, Va., and Coastal U.S., USA TODAY (Dec. 18, 2013, 2:47 PM), http://www.usatoday.com/story/news/nation/2013/12/17/sea-level-rise-swamps- norfolk-us-coasts/3893825/ (describing the experience of home owners in Virginia’s tidewater region who have been offered federal funds to raise their houses in flood zones despite these homes being classified as “sever repetitive loss properties”. The government offers to cover up 75% of improvements on houses that can exceed $100,000) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 104. See Rebecca Leber, Virginia Lawmaker Says ‘Sea Level Rise’ Is A ‘Left Wing Term,’ Excises It From State Report On Coastal Flooding, CLIMATE PROGRESS, (June 10, 2012, 6:59 PM), http://thinkprogress.org/climate/2012/06/10/496982/virginia-lawmaker-says-sea- level-rise-is-a-left-wing-term-excises-it-from-state-report-on-coastal-flooding/ (discussing political maneuvers used to downplay the significance of a scientific
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Commonwealth’s former Attorney General, a climate change skeptic, once used his subpoena powers to investigate the alleged fraud being committed by university climate scientists.105 Nevertheless, the Virginia legislature directed the Virginia Institute of Marine Science to develop and “offer specific recommendations for the detailed investigation of preferred options for adapting to relative sea-level rise” by the start of the 2013 regular legislative session.106 The responsive report ultimately came back with an analysis of recurrent coastal flooding using four plausible scenarios of sea-level rise for planning purposes.107 The “historic” scenario used observed long-term rates of sea-level rise going back a century or more, with no acceleration of sea level rise,
report on the impact of climate change on Virginia’s coastal regions) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 105. See John Collins Rudolf, A Climate Skeptic With a Bully Pulpit in Virginia Finds an Ear in Congress, NY TIMES (February 22, 2011), available at http://www.nytimes.com/2011/02/23/science/earth/23virginia.html?pagewanted= all&_r=0 (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); Editorial, Ken Cuccinelli’s Climate-Change Witch Hunt, WASH. POST (March 11, 2012) http://www.washingtonpost.com/opinions/ken- cuccinellis-climate-change-witch-hunt/2012/03/08/gIQApmdu5R_story.html (recounting actions taken by Ken Cuccinelli against Michael E. Mann as a costly example of governmental overreach) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 106. See VA H.D.J. Res. 50 (2012) & VA S.J. Res. 76 (2012) (listing three requirements on the Virginia Institute of Marine Science to create a list of similar strategies for addressing sea level rise throughout the United States, look into the feasibility of these studies, and offer recommendations). 107. See Sea-Level-Rise Scenarios, VIRGINIA INST. OF MARINE SCIENCE, http://www.vims.edu/newsandevents/topstories/slr_scenarios.php (last visited Mar. 17, 2015) (summarizing the institute’s report on sea level rise pursuant to the declaration of the Virginia Legislature) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also Dave Malmquist, VIMS Calls for Flexible, Multi-Step Approach to Deal with Flood Risk, VIRGINIA INST. OF MARINE SCIENCE (January 12, 2013), available at http://www.vims.edu/newsandevents/_docs/flooding_study.pdf (“The report makes clear that no single response will fully address the complex web of social, legal, and environmental issues that contribute to Tidewater’s vulnerability to coastal flooding. Instead, it calls for a multi-step approach with enough flexibility to allow policymakers to adapt as conditions change and knowledge grows.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 425 estimating a rise of more than 1.5 feet on the Virginia coast.108 The “low” scenario, based on the conservative assumptions in the IPCC reports, estimated more than 3 feet of seal level rise.109 The “high” scenario, using the upper end of projections derived from global observations of sea level and air temperature, estimated 5.5 feet of sea level rise.110 And the “highest” scenario, based on ice-sheet loss, glacial melting, and a practical worst-case scenario based on current understanding, projected more than 7.5 feet of sea level rise.111 Although topography and population density varies in Coastal Virginia much more than South Florida, maps of the projected effects of sea level rise show widespread adverse impacts.112 Of the 634 miles of estuarine shorelines along the Chesapeake Bay, approximately 120 square miles of dry land lie within 3 feet of current tidal lines.113 Moreover, Coastal Virginia is experiencing substantial land subsidence,114 and the region has the highest rate of measured sea level rise over the last 100 years
108. See VIRGINIA INST. OF MARINE SCIENCE, RECURRENT FLOODING STUDY FOR TIDEWATER VIRGINIA 110–12, available at http://leg2.state.va.us/dls/h&sdocs.nsf/By+Year/SD32013/$file/SD3.pdf (chronicling the history of sea level rise in Virginia) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 109. See id. at 78 (charting sea level rise scenarios). 110. See id. (depicting historic, low, high, and highest scenarios for sea level rise). 111. See id. 112. See Maps Depicting Likelihood of Shore Protection Along the Virginia Coast, SEA LEVEL RISE PLANNING MAPS, http://plan.risingsea.net/Virginia.html (last visited Mar. 17, 2015) (compiling a list of maps comparing relative sea level rise in Virginia) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 113. See J.G. Titus, Carl Hershner, et al., Virginia, in THE LIKELIHOOD OF SHORE PROTECTION ALONG THE ATLANTIC COAST OF THE UNITED STATES 691, 701 (James G. Titus & Daniel Hudgens eds., 2010), available at http://papers.risingsea.net/federal_reports/shore-protection-retreat-sea-level- rise-Virginia.pdf ((listing the findings of the report) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 114. See Jack Eggleston & Jason Pope, Land Subsidence and Relative Sea-Level Rise in the Southern Chesapeake Bay Region, U.S. GEOLOGICAL SURVEY 1 (2013), available at http://pubs.usgs.gov/circ/1392/pdf/circ1392.pdf (stating that “The southern Chesapeake Bay region is experiencing land subsidence and rising water levels due to global sea-level rise; land subsidence and rising water levels combine to cause relative sea-level rise.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 426 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) of any state on the east coast,115 and an estimated 16 inches of sea level rise is expected by 2050.116 Whereas the 7 foot storm surge flood historically occurred once every 28 years, projections are that 2 foot of sea level rise will mean major flooding every 1.7 years.117 Three feet of sea level rise could trigger major flooding three times every year.118 In a statement of particular import to all the real estate professions named in this article, Virginia’s report called for a comprehensive, multi-level combination of management, accommodation, and protection measures as the adaptation strategy to prepare the community to coexist with the rising seas.119 The report emphasized that “it is possible for Virginia to have an effective response to increasing flood issues BUT it takes time (20-30 years) to effectively plan and implement many of the adaptation strategies.”120 Potential management measures include zoning policies to discourage development in high-risk areas and reclamation of flood-prone lands.121 Accommodation includes raising buildings and roads, establishing emergency plans, and creating or enhancing storm water systems.122 Protection measures include engineering solutions such as levees, seawalls, and tidal gates, structures, and even living shorelines,
115. See William A. Stiles, Jr. A “Toolkit” For Sea Level Rise Adaptation In Virginia, WETLANDS WATCH 1, available at http://www.wetlandswatch.org/Portals/3/WW%20documents/sea-level- rise/ASCE%20Meeting%20Paper.pdf [hereinafter Toolkit] (providing a general over view of the effects of sea level rise in Virginia) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 116. See Facts and Findings: Sea Level Rise and Storm Surge Threats for Virginia, CLIMATE CENTRAL, available at http://slr.s3.amazonaws.com/factsheets/Virginia.pdf (listing projections for sea level rise in 2050) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 117. See Toolkit, supra note 115, at 4 (predicting rate of sea level rise). 118. Id. 119. See RECURRENT FLOODING STUDY, supra note 108, at 39 (explaining multi-level adaptation strategies). 120. Id. at vii. 121. See Toolkit, supra note 115, at 10 (citing further examples of policies that can combat the risk associated with rising sea levels). 122. See id. at 9–10 (explaining that when addressing sea level rise adaptation one should consider four categories: planning, incentives/disincentives, direct investment in public infrastructure, and land use and regulatory). RISING SEAS, RECEDING ETHICS 427 dunes, and created marshes.123 No solution completely removes the risks. After the report was issued, educators, and local governments continued to host listening sessions and information presentations, raising public awareness of the issues.124
C. Truth, Risk, Insurance and the Uncertainty Conundrum
Similar explanations of the risks of sea level rise could be offered in other places all across the nation: Boston, Charleston, New Orleans, New York, Seattle, and Tampa all face serious threats of coastal flooding.125 In theory, state and local governments and emergency managers should be protecting the public by assessing risks, hazards, and potential losses, and by preparing plans to mitigate those risks.126 To fund these efforts, the Federal Emergency Management Agency provides grants, too, which may in the future be withheld from entities that fail to
123. See RECURRENT FLOODING STUDY, supra note 108, at 14–30 (stating suggestions for protecting coast lands from rising sea levels). 124. For example, a Virginia Sea Grant sponsored a series of programs, including listening sessions and informative presentations on “Community Resilience in Coastal Virginia,” involving the coordinated efforts of the University of Virginia, City of Virginia Beach, the Hampton Roads Planning District Commission, and Glouscester County. Jane Ford, Public Meetings Set to Explore Ways to Plan for Sea Level Rise in Virginia Beach, UVATODAY (Feb. 5, 2011), https://news.virginia.edu/content/public-meetings-set-explore-ways-plan- sea-level-rise-virginia-beach (announcing the planning sessions) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 125. Baden Copeland, Josh Keller & Bill Marsh, What Could Disappear, N.Y. TIMES (Nov. 24, 2012), http://www.nytimes.com/interactive/2012/11/24/opinion/sunday/what-could- disappear.html?_r=0 (depicting the effects of sea level rise in cities across the United States) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 126. See, e.g., State Mitigation Plan Review Guide Highlights of Key Concepts, FEMA, at 3 (Sept. 8, 2014), available at http://www.fema.gov/media- library-data/1410365092470- 4dcaea71807b36f564f8e7841be4ff6b/State%20Mitigation%20Plan%20Review%2 0Guide_Key%20Concepts.pdf (“The purpose of this document is to share key concepts FEMA is considering changing or 27 strengthening in the updated version of the ‘Multi-Hazard Mitigation Planning Guidance under the Disaster Mitigation Act of 2000,’ last issued in January 2008.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 428 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) include climate change in disaster planning.127 While federal agencies must consider climate change and its effects on flooding,128 the unfortunate truth is that FEMA has failed to protect the public from the risks of climate change denial, because it does not mandate the consideration of estimated sea level rise in hazard mitigation, and the issues remains within the state or local government’s discretion.129 Eventually, the federal government might force the states and localities to act, and the boundaries of federalism will be tested yet again.130 But in the meanwhile, the state and local process of climate change planning can be (and has been) painfully and dangerously slow. Of course, a phased and multi-layered approach can be reasonable, as the U.S. Army Corps of Engineers explained in a 2014 guidance document on planning for sea level rise. That document emphasized the need for decisions to be made that would allow communities to implement projects and measures
127. Federal Emergency Management Agency, State Mitigation Plan Review Guide, Released March 2015 Effective March 2016 FP 302-094-2 available at http://www.fema.gov/media-library-data/1425915308555- aba3a873bc5f1140f7320d1ebebd18c6/State_Mitigation_Plan_Review_Guide_201 5.pdf; see discussion in News Staff, Through State Mitigation Guide, FEMA Acknowledges Possible Penalties for Climate Change Deniers, Emergency Management (March 20, 2015) available at http://www.emergencymgmt.com/disaster/State-Mitigation-Guide-FEMA- Possible-Penalties-Climate-Change-Deniers.html 128. Executive Order Establishing a Federal Flood Risk Management Standard and a Process for Further Soliciting and Considering Stakeholder Input (Jan. 30, 2015). https://www.whitehouse.gov/the-press- office/2015/01/30/executive-order-establishing-federal-flood-risk-management- standard-and- (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 129. See Incorporating Sea Level Rise (SLR) into Hazard Mitigation Assistance (HMA) Benefit Cost Analysis Frequently Asked Questions (FAQs), FEMA, available at http://www.fema.gov/media-library-data/1387903260455- e6faefb55a3f69d866994fb036625527/HMA+Sea+Level+Rise+FAQ+12-23- 2013.pdf (“Does FEMA mandate including SLR in all HMA applications? No. FEMA does not mandate the inclusion of estimated SLR for HMA project applications. The state or local community may use SLR to consider future conditions in mitigating future flood risk.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 130. The authority of the federal government to coerce state action through the withholding of grants has been upheld. See, e.g. South Dakota v. Dole, 483 U.S. 203 (1987) (Congress, through its control of the federal spending power, can encourage uniformity in the States' drinking ages by attaching conditions on the receipt of federal funds). RISING SEAS, RECEDING ETHICS 429 adapting to sea level rise with sufficient lead time for planning and construction.131 Yet the Corps also recognized the current conundrum: uncertainty makes it hard to make a decision, but decision paralysis might be worse.132 Despite the case law discussion, the factual data, the overwhelming scientific consensus, and the substantial risks ahead, individuals might continue to insist that sea level rise is fiction.133 To some degree, truth has different meanings across the professions. A scientist might accept something as true, whereas a lawyer might not.134 Climate change is clearly a concept still being tested in the courts and in the marketplace of ideas.135 But the fact is that for a great majority of the US coastline, relative sea level (RSL) has been rising over the past 60 years, a pattern consistent with the global trend.136 Even if future sea level rise proves not to be as acute as the worst case projections suggest, the actual data, and the future risks, are undeniable.137 In fact, in its 2012 assessment of sea level rise, NOAA frames the entire discussion of sea level rise in terms of
131. See Technical Letter No. 1100-2-1 from James C. Dalton, Chief, Eng’g & Constr. Div., Dep’t of the Army U.S. Army Corp of Eng’rs, to the Commander, at 3-1 (June 30, 2014), available at http://www.publications.usace.army.mil/Portals/76/Publications/ EngineerTechnicalLetters/ETL_1100-2-1.pdf (highlighting the need for proactive efforts) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 132. See id. (addressing the uncertainty in making decisions about sea level rise). 133. See Karl S. Coplan, Climate Change, Political Truth, and the Marketplace of Ideas, 2012 UTAH L. REV. 545, 546 (2012) (“[C]limate science must confront cognitive bias and framing issues in the polity.”). 134. See id. at 550–51 (discussing the ideological schism between scientists and politicians in the context of “the marketplace of ideas”). 135. See id. at 551 (“When it comes to global climate change . . . the scientific consensus—that catastrophic global warming is likely . . . has not achieved popular acceptance.”). 136. See NOAA TECHNICAL REPORT OAD CPO-1, GLOBAL SEA LEVEL RISE SCENARIOS FOR THE UNITED STATES NATIONAL CLIMATE ASSESSMENT 1 (Dec. 6, 2012), available at http://cpo.noaa.gov/sites/cpo/Reports/2012/NOAA_SLR_r3.pdf (providing an executive summary of the study) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 137. See id. (“Scenarios . . . describe future potential conditions in a manner that supports decision-making under conditions of uncertainty.”). 430 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) risk management.138 Like Florida and Virginia, NOAA assessed the problem by offering four scenarios: low change, intermediate low, intermediate high, and high.139 The lowest sea level change scenario, an 8 inch rise, is based on historic rates of observed sea level change, but emphasizes that this scenario “should be considered where there is a high tolerance for risk,” such as projects with a short lifespan or flexibility to adapt within the near-term.140 An intermediate-low scenario of 1.6 feet of sea level rise is based on projected ocean warming, and an intermediate- high scenario of 3.9 feet of sea level rise is based on projected ocean warming and recent ice sheet loss.141 Finally, the highest sea level change scenario of 6.6 foot of sea level rise, “reflects ocean warming and the maximum plausible contribution of ice sheet loss and glacial melting. This highest scenario should be considered in situations where there is little tolerance for risk.”142 Of note, recent analyses have suggested that rates of sea level rise might even be accelerating faster than previously calculated.143 Presumably, given their vulnerability to sea level rise and its effects, South Florida and Coastal Virginia should be communities with little tolerance for risk. For these places, sea level rise is an existential matter.144 And the importance of action by both government and business is further elevated by the
138. See id. (discussing the methodologies of the study and the purpose of using multiple scenarios). 139. See id. (“[S]pecific probabilities or likelihoods are not assigned to individual scenarios in this report, and none of these scenarios should be used in isolation.”). 140. See id. at 2 (discussing uncertainties involved among the several scenarios). 141. See id. at 1–2 (reporting the results of the study). 142. See id. at 2 (differentiating across the scenarios). 143. Carling C. Hay, Eric Morrow, Robert E. Kopp & Jerry X. Mitrovica, Probabilistic reanalysis of twentieth-century sea-level rise, Nature 517, 481–484 (22 January 2015) doi:10.1038/nature14093 Last updated: 4 May 2015 19:5:46 EDT available at http://www.nature.com/nature/journal/v517/n7535/full/nature14093.html 144. See, e.g., Bradley G. Bodiford, Florida’s Unnatural Disaster: Who Will Pay for the Next Hurricane, 21 U. FLA. J.L. & PUB. POL’Y 147, 148 (2010) (presenting a disastrous scenario if a strong hurricane affects south Florida). RISING SEAS, RECEDING ETHICS 431 realities of insurance.145 Historically, people could protect themselves from the risks of real estate ownership.146 But sea level rise is changing the insurance world too. In Florida, the state already bears the risks of wind insurance for many properties, with state run Citizen’s Insurance providing coverage.147 In Coastal Virginia, many areas are below the floodlines, and simply cannot be insured.148 For the insurance industry, there is no doubt that sea level rise is real.149 Insured losses for the global insurance industry due to weather related events have risen dramatically: from $6.4 billion per year in the 1980s to $40 billion for the first decade of the 2000’s.150 At some point, in some places, the risks will become uninsurable, and the insurers will withdraw.151
145. See id. at 151–52 (discussing underlying problems caused by lowering hurricane insurance for political gain). 146. See id. at 152–53 (explaining that homeowner’s insurance for coastal property in Florida has reached rates that are prohibitively expensive, lessening protection to coastal real estate compared to what it once was). 147. See id. at 151–53 (explaining Florida’s hurricane insurance program). 148. See Aaron Applegate, Norfolk Sea Level Rise Takes Shine off Waterfront Homes, PILOTONLINE.COM, (Sept. 28, 2014), http://hamptonroads.com/2014/09/norfolk-sea-level-rise-takes-shine-waterfront- homes (“Homes in the flood plains with mortgages are required by lenders to have insurance from the subsidized National Flood Insurance Program. . . . [R]eforms are steadily increasing rates—about 18 percent a year—until they represent coverage of the true cost of the risk.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 149. See Eduardo Porter, For Insurers, No Doubts on Climate Change, N.Y. TIMES (May 14, 2013), http://www.nytimes.com/2013/05/15/business/insurers-stray-from-the- conservative-line-on-climate-change.html?pagewanted=all (“[N]atural catastrophes . . . pounded insurers last year, generating $35 billion in privately insured property losses, $11 billion more than the average over the last decade.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 150. See HARVEY RUVIN ET AL., MIAMI-DADE SEA LEVEL RISE TASK FORCE AND RECOMMENDATIONS 10 (July 1, 2014), available at http://www.miamidade.gov/planning/library/reports/sea-level-rise-final- report.pdf (discussing the financial effects of natural disasters on insurance companies) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 151. See generally Virginia Haufler, Insurance and Reinsurance in a Changing Climate, WOODROW WILSON INT’L CTR. FOR SCHOLARS (May 18, 2006), available at http://www.wilsoncenter.org/sites/default/files/Paperhaufler.pdf
432 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Faced with that possibility, concerns about drinking water, roads or sewer systems seem inconsequential. Lacking insurance, the owners of the unprotected coastal community homes and businesses will be left with nothing, and no remedies, when the predictable catastrophe finally occurs. Indeed, insurance is becoming a crucial driver of how society responds to the coastal hazard of sea-level rise.152 Despite the physical and economic risks, the stark reality remains that, in the United States, our political leaders in these communities can choose to do absolutely nothing about the risks of sea level rise.153 Although FEMA may eventually end up deeply involved in disaster response efforts, neither federal nor state law mandates large-scale mitigation or prevention alternatives to evade that foreseeable future. Instead, at best, our government is engaged in a large scale planning discussion.154 But in the meanwhile, in the private economy, people buy homes,
(addressing the withdrawal of insurance companies after major storms) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 152. See Insurance Issues, FLORIDA SEA GRANT, https://www.flseagrant.org/climatechange/coastalplanning/insurance-issues- coast/ (last visited Apr. 23, 2015) (discussing changes in the National Flood Insurance Program) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 153. See generally Steve Doane, Southwest Florida Governments not Planning for Sea Rise, NEWS-PRESS.COM (Aug. 2, 2014), http://www.news- press.com/story/news/2014/08/02/southwest-florida-governments-planning-sea- rise/13532083/ (noting that Lee and Collier counties in southwest Florida have no “specific plans to address the impacts of sea level rise”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); but see, Debra Kahn, San Francisco Bay Area Enacts Sea-Level Rise Policy, SCIENTIFIC AMERICAN (Oct. 7, 2011), http://www.scientificamerican.com/article/san-francisco-bay-area-enacts-sea- level-rise-policy/ (explaining that the City of San Francisco passed a coastal development plan allowing the denial of permits in coastal areas susceptible to flooding; based on state projects, up to 180,00 acres of land could be precluded from development by 2050) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 154. See generally FLORIDA DEPT. OF ECON. OPPORTUNITY, HOW COUNTRIES, STATES, AND FLORIDA ADDRESS SEA LEVEL RISE A COMPENDIUM OF CLIMATE ADAPTATION RESEARCH 65, available at http://www.floridajobs.org/fdcp/dcp/AdaptationPlanning/CompendiumNationalS tateLocalAdaptationProjects.pdf (discussing recommendations for anticipating sea-level rise impacts on various coastal states) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 433 some committing to 30-year mortgages. Some of these homes are in places where sea level rise and its consequences present extraordinary risks that could manifest even before the mortgage is paid off.155
D. Comparative Risk: Never Again vs. Caveat Emptor
The risks and problems associated with sea level rise are global.156 Low elevation coastal zones, including South Florida and Coastal Virginia, represent just 2% of the total landmass of the earth, but home to 10% of the present world population.157 Sixty-five percent of megacities with more than 5 million
155. See id. at 7–8 (explaining that the study estimates potential economic damage from environmental phenomena in Florida). 156. See, e.g., Sea-Level Rise in Small Island Nations - Up to Four Times the Global Average - to Cost US$ Trillions in Annual Economic Loss and Impede Future Development: Shift to Green Policies and Investment Critical, UNEP NEWS CENTRE (June 5, 2014), http://www.unep.org/newscentre/Default.aspx?ArticleID=10879&DocumentID=2 791#sthash.a489Zy9e.dpuf (“Climate change-induced sea-level rise in the world's 52 small island nations - estimated to be up to four times the global average - continues to be the most pressing threat to their environment and socio-economic development with annual losses at the trillions of dollars due to increased vulnerability.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also R. Kerry Turner et. al., Coastal Management for Sustainable Development: Analysing Environmental and Socio-Economic Changes on the UK Coast, 164 GEOGRAPHICAL J., 269, 270 (Nov. 1998), available at http://tearai.kete.net.nz/documents/0000/0000/0184/econdev.pdf (describing threats to coastal zones in England) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); H.E. Pelling, et al, The Impact of Rapid Coastline Changes and Sea Level Rise on the Tides in the Bohai Sea, 118 CHINA, J. GEOPHYS. RES. OCEANS, 3462, 3462, available at http://onlinelibrary.wiley.com/doi/10.1002/jgrc.20258/pdf (discussing tidal behavior in China over the last thirty-five years) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 157. See Anthony Oliver-Smith, Sea Level Rise and the Vulnerability of Coastal Peoples: Responding to the Local Challenges of Global Climate Change in the 21st Century, 7 UNU-EHS, at 5, 20–21 (2009), available at http://d-nb.info/102969186X/34 (discussing human causes and responses regarding climate change, with a focus on migration) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 434 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) inhabitants are located in these regions, and lands and peoples will be affected all over the planet.158 Consider, for example, the Netherlands, home to Amsterdam and Rotterdam, where many communities exist well below sea level.159 The nation is known for its iconic water- moving windmills and the complex engineering system that protects the country from floods.160 The Dutch view on sea level rise stands in sharp contrast to the United States. Although long accustomed to water management, a massive flood changed the national outlook, and the willingness of its people to accept risk.161 The “Misery of 1953” inspired a fundamental shift in the national tolerance of flood risk, and “Never Again” became the Dutch leader’s mantra.162 Unsurprisingly, the Dutch have squarely confronted climate change and sea level rise, announcing the Delta Programme in 2014.163 Every year, for the next 40 years, the Dutch plan to use € 1 billion for flood risk management and fresh water protection and maintenance, with € 600 million available
158. See id. at 20–21 (explaining that the largest levels of relative sea level rise is expected to occur in regions of population density—in India and Bangladesh alone, almost 14 million people would be impacted, in addition to other Asian coastlines, as well as Arctic areas). 159. See id. at 21 (describing the Netherlands as densely populated and susceptible to rising sea levels). 160. See id. at 27 (describing the Netherlands as a coastal area subject to multiple natural and human-induced stresses, such as subsidence or declining natural defenses). 161. See Molly Moore, Rethinking Defenses Against Sea’s Power Washington Post Foreign Service, WASH. POST (Sept. 8, 2005), http://www.washingtonpost.com/wp- dyn/content/article/2005/09/07/AR2005090702400.html (“On Feb. 1, 1953, a high-tide storm breached the famed Dutch dikes in more than 450 places. Nearly 1,900 people died, many as they slept. More than 47,000 homes and other buildings were swept away or splintered in the icy inundation.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 162. See id. (discussing preventative measures taken by the Dutch after “The Misery of 1953”). 163. See generally WORKING ON THE DELTA: PROMISING SOLUTIONS FOR TASKING AND AMBITIONS, DELTA PROGRAMME (2014), available at http://www.deltacommissaris.nl/english/Images/Delta%20Programme%202014_ English_tcm310-345435.pdf (outlining how to protect coastline in the Netherlands) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 435 for annual infrastructure investments.164 Dutch engineers have already planned and designed projects and revised safety standards related to river widening, flood management, and salt water intrusion and freshwater supplies.165 Unwilling to accept the risks, the people of the Netherlands are building for a climate-changed future.166 The American experience is different. While some local leaders in New Orleans and New York might be convinced of the need for action, not even the misery of Hurricane Katrina in 2005 or the storm surges from Superstorm Sandy in 2012 convinced our nation to comprehensively build new infrastructure for sea level rise.167 Compared with our vulnerable Dutch counterparts, Americans in many similarly situated coastal communities seem far behind. Miami still has no clear plans for self-defense from the rising seas, and officials are still “laying the foundation for action.”168 In 2014, a task force urgently recommended that the community must accelerate the adaptation process by selecting
164. See id. at 7 (discussing how the Dutch will allocate funds to protect their coastline). 165. See id. (outlining methods to reduce the risk of large-scale flooding in the Netherlands). 166. See id. (“Based on the resources currently available and extrapolated, the Delta Programme Commissioner believes that implementing the necessary measures in good time, i.e. before 2050, is a challenge.”). 167. See Hurricane & Storm Damage Risk Reduction System, U.S. ARMY CORPS OF ENGINEERS, http://www.mvn.usace.army.mil/Missions/HSDRRS.aspx (last visited Mar. 16, 2015) (charting new flood protection systems in New Orleans, but the Corps clearly and openly describes them as “Hurricane & Storm Damage Risk Reduction Systems”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also Understanding Risk, U.S. ARMY CORPS OF ENGINEERS, http://www.mvn.usace.army.mil/Missions/HSDRRS/RiskReductionPlan/Underst andingRisk.aspx (last visited Mar. 16, 2015) (“There will always be a risk of storm damage. There is a risk of flooding every year from rainfall and storm surge. Everyone shares in the responsibility to "buy down" risk through zoning, building codes, insurance and other measures.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 168. See Miami Dade Sea Level Rise Task Force and Recommendations supra note 150, at 4 (“The Sea Level Rise Task Force recommends accelerating . . . and formally selecting the engineering and other relevant expertise needed to develop the robust capital plan, vetting the elements . . . as well as what measurable indicators will trigger timely sequencing.”) 436 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) engineers, developing a capital plan, and addressing critical elements such as flood protection, salinity structures, pump stations, road and bridge designs.169 Instead, in 2015, Floridians learned that our state governor had an unwritten policy that prevented state officials from even using the terms “climate change.”170 In fact, employees were instructed to refer to “sea level rise” as “nuisance flooding.”171 Paradoxically, as an article in Bloomberg’s Businessweek cynically explained, the governor’s denials, and the continued building boom in America’s vulnerable coastal cities might even be rational – but only in the short term.172 South Florida relies almost exclusively on real estate taxes to fund public infrastructure, so communities need to maintain the value of real estate if they are to have any hope in the future of implementing measures to adapt to sea level risk.173 In addition, naïve buyers and sellers in Miami Beach have not yet “connected the dots” between nuisance flood events and the future consequences of sea level rise – a connection that would spark a dramatic downturn in the tax base.174 Political denials, however, will not prevent the predictable downturn. From a consumer and public perspective, and especially when compared with the actions being taken by the similarly vulnerable people of the Netherlands and elsewhere, the laws and policies and actions of the United States, Florida, and Virginia demonstrate an incomplete government commitment to protecting our coastal communities from sea level rise. Rational
169. See id. (discussing the plan’s goal of reinventing urban infrastructure). 170. Tristram Korten, In Florida, officials ban term “climate change”, Miami Herald (Mar. 8, 2015) available at http://www.miamiherald.com/news/state/florida/article12983720.html 171. Id. 172. See Robert Meyer, How Climate Change Is Fueling the Miami Real Estate Boom, BUSINESSWEEK (Oct. 20, 2014), http://www.businessweek.com/articles/2014-10-20/how-climate-change-is- fueling-the-miami-real-estate-boom#p2 (“South Florida’s best shot at coping with the long-term environmental threat may be a strategy that no doubt seems perverse to environmentalists: aggressively foster a collective belief that sea level rise is not something we urgently need to worry about.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 173. See id. (discussing a controversial remedy for south Florida). 174. See id. (“Controlled ignorance, in some cases, may be a good thing.”). RISING SEAS, RECEDING ETHICS 437 or not, it is undeniable that the risks of sea level rise are borne by the uninformed consumer. The public sector is failing in its basic duty to protect and secure its people. And in private sector, even though the ethical traditions of the real estate professions (in theory) all insist upon truth and honesty for everyone, they seem to operate (in practice) based on a wholly different principle: caveat emptor. IV. Sea Level Rise and Human Rights. From a strictly deontological perspective, some people might characterize the actions of the real estate professions as ethical because they are legal. After all, local, state, and federal laws have evolved to establish certain minimum thresholds: codes ensure construction projects conform with safety and hurricane standards; elevated buildings on pilings allow room for floodwaters; coastal setbacks protect dunes; permits are complied with and enforced; certificates of occupancy must be issued. Otherwise, as far as sea level rise is concerned, let the buyer beware. The potentially transformative nature of sea level rise, and the magnitude of the potential problems, renders these traditional land use development laws and measures insufficient. Given the material facts of sea level rise, mere disclosure seems insufficient, too. Taking a consequential view, is it ethical for a planner, architect, engineer or lawyer to include a small print disclosure in a document, informing a buyer that their land is likely to be flooded by rising seas within the life of the buyer’s mortgage, and then to sell the property anyway? Consider, for example, the lawyer advising his banker client at the real estate closing. In a low density coastal neighborhood of Virginia, where the government is unlikely to make massive investments in levees and protections from rising seas, the lawyer should caution the client of the likelihood that the property may be abandoned and the buyer may default. Moreover, the failure to disclose the critical risks of sea level rise to the buyer might even be characterized as an omission of fact that is the equivalent of an unethical affirmative false statement.175
175. See, e.g., ABA RULES, supra note 22, at Rule 4.1 cmt. (2013) (“Misrepresentations can also occur by partially true but misleading statements or omissions that are the equivalent of affirmative false statements.”); VIRGINIA RULES, supra note 21, at Rule 4.1; FLORIDA RULES, supra note 20, at Rule 4-4.1. 438 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
For the people who live and work on the coastlines, the buyer’s expectation of property ownership as a long-term investment that accrues equity eventually will be replaced by a new model of property ownership as a depreciating asset with a limited time horizon.176 In some coastal communities, sea level rise may even reflect a threat to human rights.177 Article 25 of the United Nations’ Universal Declaration of Human Rights suggests that everyone has a right to housing and security, even in circumstances beyond our control.178 Article 12 of the International Covenant on Economic Social and Cultural Rights, which recognizes a right to physical and mental health, has been interpreted to include a right to safe drinking water and sufficient sanitation.179 The United States has ratified the Universal Declaration of Human Rights—but not the International Covenant. Nevertheless, both documents provide insights into the ethical issues associated with the threats posed by sea level rise. Given the potential for basic human rights violations, the conduct of the real estate professionals needs rethinking. The Republic of the Marshall Islands, fearing the potential loss of
176. See Jason P. Oppenheim, The Waters are Rising! Why Isn’t My Tax Basis Sinking? Why Coastal Land Should be a Depreciable Asset in Light of Global Warming and the Rise in Sea Level, 8 U.MASS. L. REV. 228, 238 (2013) (“[F]ederal courts, the Tax Court, and the IRS—through revenue rulings—have always stood firm that land is a non-depreciable asset because it does not have a finite useful life.”). 177. See DELTA PROGRAMME, supra note 163, at 38 (“Social disruption occurs if there are large groups of casualties where the flood occurs or if there is a lot of economic damage caused by a flood.”). 178. See Universal Declaration of Human Rights, Art. 25 (1948) (“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security . . . in circumstances beyond his control.”). 179. See International Covenant on Economic, Social and Cultural Rights, G.A. Res. 2200A (XXI) (Dec. 16, 1966), http://www.ohchr.org/en/professionalinterest/pages/cescr.aspx (enumerating the steps that participating states must take for the full realization of this standard) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); Comm. on Economic, Social and Cultural Rights, General Comment 15, 29th Sess., U.N. Doc. E/C 12/2002/11, http://www1.umn.edu/humanrts/gencomm/escgencom15.htm (reciting the legal bases of the right to water) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 439 their national lands as a result of sea level rise, submitted a resolution to the United Nations decrying the threats to the human rights to life, property, culture, food, housing, health and water.180 Similar arguments could be made in South Florida and Coastal Virginia. Corporations, and their professionals, should respect human rights. In a 2008 UN report providing a Framework for Business and Human Rights, Professor John Ruggie explained the minimum responsibilities of corporations to ensure that human rights are realized.181 First, he emphasized governments’ duty to protect against human rights abuses by third parties, including businesses – which, of course, suggests the need for corporations to comply.182 Second, he noted businesses’ responsibility to respect all human rights.183 Third, he acknowledged the need for more effective access to remedies for people affected by corporate related human rights abuses.184 Applying this Ruggie Framework to a climate changed world, for example, both government and business must act to protect aquifers from sea level rise and to maintain the integrity of the
180. See generally Phillip H. Muller, UN Human Rights Council Res. 7/23, National Communication regarding the Relationship Between Human Rights & The Impacts of Climate Change (Dec. 31, 2008), available at http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0C B4QFjAA&url=http%3A%2F%2Fwww.ohchr.org%2Fdocuments%2Fissues%2Fcl imatechange%2Fsubmissions%2Frepublic_of_the_marshall_islands.doc&ei=XZd hVKOkFIf8yQT8poLYDA&usg=AFQjCNE-E- GccfF81_5K1O57u13yfkYV6g&bvm=bv.79189006,d.aWw&cad=rja (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 181. See UN HUMAN RIGHTS COUNCIL, PROMOTION AND PROTECTION OF ALL HUMAN RIGHTS, CIVIL, POLITICAL, ECONOMIC, SOCIAL AND CULTURAL RIGHTS, INCLUDING THE RIGHT TO DEVELOPMENT 10, available at http://www.reports-and-materials.org/Ruggie-report-7-Apr-2008.pdf (noting that “some States are beginning to use ‘corporate culture’ in deciding corporate criminal accountability”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 182. See id. at 4 (emphasizing “the State duty to protect against human rights abuses by third parties”). 183. See id. at 8 (recognizing “the corporate responsibility to respect human rights”). 184. See id. at 4 (stating the ineffectiveness of status quo remedies for individuals affected by human rights abuses inflicted by businesses and corporations). 440 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) water infrastructure.185 The human right to water and sanitation entitles everyone access to a sufficient, safe, physically accessible, and affordable amount of water for personal and domestic uses.186 And there is an increasing societal expectation that companies will ensure that their operations do not compromise access to safe drinking water and sanitation.187 Yet, in the United States, actions to protect water supplies from sea level rise remain discretionary; our society seems to be waiting for the catastrophe to occur.188 But in the meanwhile, it is difficult to reconcile the status quo and risks ahead with the ethical standards of the various professions and human rights declarations.189 The risks of sea level rise in coastal communities are significant, yet development and the real estate industry marches on.190 Sure, local zoning and flood control might ensure that houses are developed at a sufficient height above sea level to reduce the risk of flooding, but
185. See id. (noting that “as economic actors, companies have unique responsibilities”). 186. See UN HUMAN RIGHTS COUNCIL, REPORT OF THE UNITED NATIONS HIGH COMMISSIONER FOR HUMAN RIGHTS ON THE SCOPE AND CONTENT OF THE RELEVANT HUMAN RIGHTS OBLIGATIONS RELATED TO EQUITABLE ACCESS TO SAFE DRINKING WATER AND SANITATION UNDER INTERNATIONAL HUMAN RIGHTS INSTRUMENTS 10, available at http://www2.ohchr.org/english/issues/water/iexpert/docs/A-CHR-6- 3_August07.pdf (emphasizing the importance of access to safe drinking water and the ramifications of lack of access, including inequality resulting from disproportionate impacts on women) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 187. See id. at 16 (“Submissions received by the private sector during the consultation process also highlight the fact that various private water providers support recognition of access to safe drinking water as a human right.”). 188. See Oppenheim, supra note 176, at 230–31 (“Over the next hundred years the sea level is expected to rise at an accelerated pace due to global warming. Over 20,000 km2 of coastal land in the eastern United States is at risk of becoming inundated by a rise in sea level over this period.”). 189. See supra Part I (discussing the ethical obligations of the various professions that interact with the problems presented by coastal sea levels). 190. See Oppenheim, supra note 176, at 228 (explaining that “[t]he rise in sea level means that many coastal property owners will see a decrease in their property size as the sea inundates the dry land”). RISING SEAS, RECEDING ETHICS 441 coastal communities will be affected in many other ways.191 What good is a dry home in a community where the roads are unpassable, and drinking water is unavailable? And will there be any remedies for the people whose homes become uninsurable or valueless?
V. Taking the Higher Ground: Professionalism and Corporate Social Responsibility.
Professionals have duties to the community of which they are a part.192 Among them are restrictive duties not to lie, and affirmative duties to inform.193 Unfounded speculations that scientists are wrong, and deflections about “scientific uncertainty,” do not conform with those duties; the ethical considerations for each profession are certain.194 Are the planners really providing adequate, timely, clear and accurate information on planning issues? Are the architects engaged in false statements of material fact, or conduct involving the wanton disregard of the rights of others? Are the civil engineers being honest and impartial and serving with fidelity the public? Have the realtors concealed pertinent facts relating to the property or the transaction? And are the compliance professionals really ensuring that the companies are acting with honesty, fairness and diligence? And have the lawyers participated in a client’s fraud, or otherwise failed to disclose material facts to their clients or third parties? Professionals and corporations are not being prosecuted for ethics violations related to sea level rise.195 Our legal and ethical systems, despite their emphasis upon disclosure of the
191. See McNeil et al., supra note 1 (describing the various dangers presented by rising sea levels, including dangers to NASA development projects and also private development). 192. See supra Part I (observing the responsibility and ethics obligations of professionals). 193. See supra note 24 (explaining that under Virginia law lawyers are prohibited from making false statements of fact or law to a tribunal and obligated to disclose certain facts related to criminal or fraudulent acts committed by their clients). 194. See supra note 175 (establishing certain ethical responsibilities for lawyers, emphasizing the duty to communicate in honest manner). 195. See UN HUMAN RIGHTS COUNCIL, supra note 181 (advocating for increased criminal accountability for corporations). 442 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) truth, have thus far been inadequate to motivate present-day actions to protect the public from a climate-changed future.196 To some degree, the inaction is explained by the nature of the problem.197 No one profession can hold a single professional accountable.198 Licensing authorities may be understandably reluctant to become arbiters of truth on a politically divisive issue,199 and climate change is a “wicked problem” that defies simple resolution, presenting enormous interdependencies and uncertainties.200 Forward-looking and slowly evolving, the corollary of sea level rise is a matter considered by using projections and estimates – opening it up to criticisms, evasions and deceptions, despite its basis in science and data.201 Indeed, even the U.S. Supreme Court has wrestled with the forecasting nature of sea level rising with some justices calling the risks remote but real while others consider them speculative.202 Still, sea level rise will have extraordinary consequences for coastal communities; people have their life’s savings and
196. See McNeil et al, supra note 1 (observing the lack of cooperation and bipartisanship in addressing climate change). 197. See id. (discussing the lack of scientific agreement in certain groups over the accurate levels of danger associated with climate change). 198. See supra notes 22, 28, 29 (recognizing that many different professions are involved in the discussion of how to address climate change through enforcement of professional ethics requirements). 199. See James Moliterno, Politically Motivated Bar Discipline, 83 Wash. U. L. Q. 725, 725 (2005) (noting that “the threat of bar discipline has once again become an overreaction to justifiable fear and turmoil”). 200. See Richard J. Lazarus, Super Wicked Problems and Climate Change: Restraining the Present to Liberate the Future, 94 Cornell L. Rev. 1153, 1158–59 (2009) (highlighting “the distinct features of the lawmaking challenges presented by global climate change that render it a ‘super wicked problem’ for public policy resolution and therefore legal redress”). 201. See McNeil et al., supra note 1 (discussing the nature of the climate change debate and its reliance on competing information and scientific methods). 202. See Massachusetts v. EPA, 549 U.S. 497, 526 (2007) (“[A]t least according to petitioners' uncontested affidavits—the rise in sea levels associated with global warming has already harmed and will continue to harm Massachusetts. The risk of catastrophic harm, though remote, is nevertheless real.”). But see Id. at 542 (Roberts, C.J., dissenting) (rejecting claims that sea- level rise had caused injury to the State of Massachusetts, and concluding that any actual loss of coastline was “pure conjecture”). RISING SEAS, RECEDING ETHICS 443 livelihoods at stake.203 Eventually, inescapably, American society will finally be forced to change: the “lawmaking moment” will arrive.204 Perhaps the effects of Superstorm Sandy, which triggered a dialogue in New York and New Jersey, have marked a turning point in the United States.205 Some Florida leaders have begun to discuss the realistic need for robust decision-making, despite the deep uncertainties involved.206 But elsewhere, the continuation of coastal land use development and transactions, and the absence of affirmative disclosures, or other measures to help communities adapt to the rising seas, may represent an ethical failure.207 While ambiguities exist as to the enforceability of professional ethics, the aspirations of each profession provide greater clarity. To adapt to the coming changes, the real estate and land use development professionals should reread and embrace their own professional aspirations. Their employers and clients must engage in corporate social responsibility, too. Aspirational elements of the ethical codes for all the professions – planners, architects, engineers, and yes, even the lawyers – provide clear direction on how these professionals should approach the realities of sea level rise.
203. See Oppenheim, supra note 176, at 230–31 (explaining the devastating consequences of the sea-level rise that will inevitably occur without significant action to reverse climate change). 204. See Oppenheim, supra note 176, at 230–31 (addressing the dire need for institutional action to respond to growing climate change threats). 205. See Dan Vergano, Sandy Revives Debate over Sea-Level Rise, USA TODAY (November 28, 2012, 2:50 PM), http://www.usatoday.com/story/tech/2012/11/27/sandy-sea-level-rise/1730405/ (“No surprise. The Eastern Seaboard—or any coastal region—occasionally finds itself in the cross hairs of ferocious ocean storms. But it may have taken Sandy to drive home the added threat that scientists have been warning about for years: a rise in the sea level.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 206. See SOUTH FLA. WATER MGMT. DIST., WORKSHOP ON ROBUST DECISION MAKING UNDER DEEP UNCERTAINTY, at ii (Sept. 5, 2014), available at http://www.southeastfloridaclimatecompact.org/wp- content/uploads/2014/12/RDMWorkshop-Sept5th-2.pdf (noting that Robust Decision Making (RDM) is “a quantitative decision-analytic approach for supporting decisions under conditions of deep uncertainty) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE. AND THE ENVIRONMENT). 207. See supra Part I (arguing that ethical responsibilities of professionals require a response to the severe dangers presented by climate change). 444 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Planners should emphasize the rights of others, demonstrate concern for the long-range consequences of present actions, and promote “excellence of design and endeavor to conserve and preserve the integrity and heritage of the natural and built environment.”208 The ethical codes of both the architects and the civil engineers call for a focus upon sustainable communities: architects should “should advocate the design, construction, and operation of sustainable buildings and communities,”209 and civil engineers should “hold paramount the safety, health and welfare of the public and shall strive to comply with the principles of sustainable development in the performance of their professional duties.”210 The engineers’ ethical code even adds a definition of sustainable development: “the process of applying natural, human, and economic resources to enhance the safety, welfare, and quality of life for all of society while maintaining the availability of the remaining natural resources.”211 As for the lawyers, they have a discretionary duty to advise their client, rendering candid advice, even on matters of economics, politics and morality.212 The Preamble to the Rules of
208. See AICP Code of Ethics and Professional Conduct, AM. INST. OF CERTIFIED PLANNERS, at § A.1 (Oct. 3, 2009), https://www.planning.org/ethics/ethicscode.htm (stating that “[o]ur primary obligation is to serve the public interest and we, therefore, owe our allegiance to a conscientiously attained concept of the public interest that is formulated through continuous and open debate”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 209. See AM. INST. OF ARCHITECTS, 2012 CODE OF ETHICS & PROFESSIONAL CONDUCT, CANON VI, E.S. 6.2, available at http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aiap074122.pdf (encouraging engineers to “promote sustainable design and development principles in their professional activities”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 210. See Code of Ethics, AM. SOC’Y OF CIVIL ENG’R, at Canon 1 (July 23, 2006) http://www.asce.org/code_of_ethics/ (emphasizing the importance of sustainability in execution of professional duties) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE AND THE ENVIRONMENT). 211. See id. (enumerating the characteristics of sustainable development, including an explicit focus on quality of life and responsible management of natural resources). 212. See ABA RULES, supra note 22, at Rule 2.1 (“In representing a client, a lawyer shall exercise independent professional judgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to
RISING SEAS, RECEDING ETHICS 445
Professional Conduct for Florida and Virginia (and the American Bar Association) further notes that lawyers, as members of a learned profession, “should cultivate knowledge of the law beyond its use for clients” and “employ that knowledge in reform of the law.”213 But perhaps the preamble to the realtor’s code of ethics says it best:
Under all is the land. Upon its wise utilization and widely allocated ownership depend the survival and growth of free institutions and of our civilization. Realtors should recognize that the interests of the nation and its citizens require the highest and best use of the land and the widest distribution of land ownership. They require the creation of adequate housing, the building of functioning cities, the development of productive industries and farms, and the preservation of a healthful environment.214
In the foreseeable future, our cities might not function, and some lands may be under the sea.215 When it comes to confront the truths of sea level rise, the evidence suggests that
other considerations such as moral, economic, social and political factors, that may be relevant to the client's situation.”). 213. See FLORIDA RULES, supra note 20, at Preamble (emphasizing the importance of access legal services); see also VIRGINIA RULES, supra note 21, at Preamble. 214. See Code of Ethics and Standards of Practice, NAT’L ASSOC. OF REALTORS, at Preamble (Jan. 1, 2012), http://www.realtor.org/mempolweb.nsf/pages/code (“Such interests impose obligations beyond those of ordinary commerce. They impose grave social responsibility and a patriotic duty to which REALTORS® should dedicate themselves, and for which they should be diligent in preparing themselves.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 215. See McNeil et al., supra note 1 (“Tidal waters worldwide have climbed an average of 8 inches (20 cm) over the past century, according to the 2014 National Climate Assessment. The two main causes are the volume of water added to oceans from glacial melt and the expansion of that water from rising sea temperatures.”). 446 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) our many real estate professions are falling far short of their professional aspirations.216 The professional’s employers and clients must help, too. Corporations, by law, have many rights and privileges; with them comes the obligation to meet essential responsibilities.217 Mere compliance with law is not enough when there are questions as to whether a company’s real estate endeavors fail to protect human rights. Principles of corporate social responsibility must apply. Some critics, continuing to adhere to the notion of caveat emptor, might insist that real estate related corporations have no special duties to protect their customers from sea level rise. Corporate social responsibility, they would claim, is not a business imperative, and ethics and virtue might not be rewarded in the marketplace.218 But the ability to make a profit from a person who ignores the facts of sea level rise does not make it ethical. And, even without the restraints of ethics and human rights, the economic case for corporate social responsibility exists, too.219 An optimistic economic argument can be made that happier employees lead to better productivity, and happier customers lead to better corporate reputations.220 Conversely, if
216. See NAT’L ASSOC. OF REALTORS, supra note 214 (listing the various responsibilities of realtors related to public service, social responsibility, and non-commercial obligations). 217. See Michael Noer, David M. Ewalt & Tara Weiss, Corporate Social Responsibility, FORBES (Oct. 17, 2008), http://www.forbes.com/2008/10/16/corporate-social-responsibility-corprespons08- lead-cx_mn_de_tw_1016csr_land.html (outlining the purpose and characteristics of socially responsible corporate behavior) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 218. See id. (arguing that “firms will gain a competitive advantage by appealing to the growing numbers of socially and environmental oriented consumers, investors and employees”). 219. See id. (“We increasingly hear that corporate social responsibility (CSR) has become a business imperative. “). 220. See, e.g., Devin Thorpe, Why CSR? The Benefits Of Corporate Social Responsibility Will Move You To Act, FORBES (May 18, 2013) available at http://www.forbes.com/sites/devinthorpe/2013/05/18/why-csr-the-benefits-of- corporate-social-responsibility-will-move-you-to-act/(“While each company I interviewed had varying responses for the benefits of CSR and cause marketing for the company, 51 of 59 believe that they have happier employees and 45 of the 59 believe they end up with better employees, either as a result of being able to attract better talent or that the CSR programs help to develop better employees.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). RISING SEAS, RECEDING ETHICS 447 the status quo remains, and the disasters happen, a more pessimistic approach to economics would note that unhappy customers (and their lawyers) will search for others to hold accountable. The corporations that planned, designed, built and sold the properties, knowing of the risks ahead, will be prime targets. Neither the lawsuits, nor even the disasters, have to happen. In Hans Brinker’s famous story, the Little Dutch Boy – despite knowing that he would be late for school -- puts his finger in the dyke, stopping the trickle of water, and saving his community from a catastrophe. . Professionals and businesses in real estate related industries need to demonstrate a similar degree of awareness and self-sacrifice. Collectively, they all need to focus on the long-term sustainability of the community, even if it means forgoing a short-term profit opportunity. Many companies and professionals have already pursued the ethical and responsible path. Google abandoned its support for the American Legislative Exchange Council, taking issue with its opposition to climate change policies.221 Sustainability of the coastline has been embraced as a principle of corporate social responsibility, and developers routinely set aside lands for environmental conservation.222 The Urban Land Institute, an 80- year old international interdisciplinary organization dedicated to “creating and sustaining thriving communities worldwide,” even published its Ten Principles for Coastal Development, offering guidance for land use developers.223 Many of the principles focus
221. See Brian Fung, Google: We’re Parting with the Climate Change Skeptics at ALEC, WASH. POST (Sept. 22, 2014), http://www.washingtonpost.com/blogs/the-switch/wp/2014/09/22/google-were- parting-with-the-climate-change-skeptics-at-alec/ (“Google had initially supported ALEC over an ‘unrelated’ issue, Schmidt told Rehm. But ALEC’s stand on climate change convinced Google to pull its support.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 222. See Kamille Wolff Dean, Corporate Social Responsibility and Conservation: The Preservation of Ecology and Culture to Sustain the Sea Islands, 37 WM. & MARY ENVTL. L. & POL’Y REV. 375, 375 (2013) (“Reformed corporate land use techniques that reflect prudent and sustainable master- planned communities may result in manageable natural and cultural resource preservation.”). 223. See MICHAEL PAWLUKIEWICZ, ET AL., URBAN LAND INSTITUTE, TEN PRINCIPLES FOR COASTAL DEVELOPMENT, at v (2007), available at www.uli.org/wp-content/uploads/ULI-Documents/Ten-Principles-for-Coastal-
448 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) on safety and sustainability.224 The tenth principle – “Commit to Stewardship That Will Sustain Coastal Areas” – provides a noteworthy insight on the role of corporations in coastal development.225 Achieving sustainable development, the Urban Land Institute explains, requires the corporation to become a partner with the public sector and the community as a whole:
To effectively implement a program of sustainable development, the community must share a vision of its future. This vision involves a strategy for implementation, which includes funding mechanisms (public and private), potential partners (and their responsibilities), and an agenda or time frame for achieving the vision. One way to implement the strategy to achieve the vision is to build partnerships that maximize benefits for the community and the environment. A partnership is a process, not a product. Successful navigation through the process results in benefits for all parties.226
Development.pdf (“The principles are intended to guide decision makers, citizens, public officials, planners, developers, and others in the creation of places that build community, enrich the economy, and protect the environment.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 224. See id. at 1 “The ten principles are (1) Enhance Value by Protecting and Conserving Natural Systems; (2) Identify Natural Hazards and Reduce Vulnerability; (3) Apply Comprehensive Assessments to the Region and Site; (4) Lower Risk by Exceeding Standards for Siting and Construction; (5) Adopt Successful Practices from Dynamic Coastal Conditions; (6) Use Market- Based Incentives to Encourage Appropriate Development; (7) Address Social and Economic Equity Concerns; (8) Balance the Public’s Right of Access and Use with Private Property Rights; (9) Protect Fragile Water Resources on the Coast; and (10) Commit to Stewardship That Will Sustain Coastal Areas.”). 225. See id. at 28 (“Sustainable development respects complexity by taking into account the fact that ecological, economic, and social systems are interconnected.”). 226. See id. at 29. (“Public sector entities can leverage and maximize public assets, increase their control over the development process, and create a vibrant built environment. Private sector entities are given greater access to land and receive more support throughout the development process.”). RISING SEAS, RECEDING ETHICS 449
Unfortunately, the voluntary conduct of an honorable few will not suffice. In the absence of a well-planned, coordinated, and comprehensive public and private sector response to the real threats of sea level rise, the entire community will remain at risk. Ethical leadership must emerge. Everyone in the real estate industry – especially in South Florida and Coastal Virginia – needs to start insisting upon an open and honest dialogue about the problems that lie ahead, holding each other to the highest standards of ethics and corporate social responsibility. The status quo – allowing some to engage in blissful or intentional ignorance, or worse yet, in tortious misconduct and denials – is unacceptable. Whether physical or metaphysical, one breach in the levee means widespread suffering.
VI. Conclusion
Despite deep concerns about climate change and sea level rise, communities have not abandoned the coastlines: nor should they. Humanity is inextricably connected to the oceans. It is our essential natural resource, a provider of air and rain, food and medicine, energy and minerals, transportation, industry and recreation. This article is not intended to rewrite our history, to halt our economy, nor to declare defeat. Rather, it is a call for caution and conscientious action. The law has not provided a clear solution to sea level rise. As a result, many real estate professionals engaged in activities in South Florida and Coastal Virginia will deflect criticisms by pointing to their adherence to the legal requirements. But legal does not mean ethical or moral. Basic human rights are at stake, as the Republic of the Marshall Islands warned in a petition to the United Nations. An excerpt from that document, with modest revisions to the geographical references, applies just as readily to South Florida and Coastal Virginia:
[Coastal communities] face critical economic and development challenges. They are highly vulnerable to the physical impacts of sea level rise, and these impacts can have a direct and substantial negative effect upon basic human rights. While important adaptation strategies are being pursued, [Florida and Virginia] face financial 450 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
and capacity challenges regarding their implementation. In addition, long-term adaptation strategies are difficult to realize in the face of potentially drastic sea level rise predictions.227
Sea level rise presents acute risks to coastal communities. Eventually, the discussion must transition from abstract risks to realistic policy. Communities must decide whether and when to retreat or fortify, and those decisions could mean economic losses or even financial ruin for local residents and property owners. Recognizing this future, real estate professionals must live up to their own mandatory and aspirational professional standards. The ethics and professionalism of every project must be considered, taking into consideration not only the short-term profits on a project, but also the long-term existence of the community around it. Ethical behavior by the real estate industry means informing and protecting the people, partnering with the public sector leaders, and ensuring a resilient community with a sustainable future.
227. This paragraph echoes the phrasing in the Executive Summary of the Republic of the Marshall Islands petition to the United Nations, which read as follows: “The Republic of the Marshall Islands is a small island developing state which consists of many low-lying atolls. The nation faces critical economic and development challenges. The nation is highly vulnerable to the physical impacts of climate change; these impacts have a direct and substantial negative effect upon basic human rights. While important adaptation strategies are being pursued, RMI faces financial and capacity challenges regarding their implementation. In addition, long-term adaptation strategies are difficult to realize in the face of potentially drastic sea level rise predictions. As such, to preserve basic human rights, urgent international action and individual accountability from all nations.” Implementation of the EU Directive on Environmental Impact Assessment in the Czech Republic: How Long Can the Wolf Be Tricked?
Veronika Tomoszkova*
Abstract
After the Velvet Revolution in 1989, the former Czechoslovakia experienced the most enthusiastic wave of environmental law drafting in its history.1 The Czech Act on Environmental Impact Assessment (“EIA Act”) was among the first new environmental statutes adopted already in 1992 with the intention to harmonize Czechoslovakian law with European Union (“EU”) law and to prevent exploitation and pollution of the environment in Czechoslovakia, which in the early 1990s counted for one of the worst in the world.2 The hardship of transition process that hit Czechoslovakia in 1992 caused a shift from enthusiastic pro-active environmental movement towards more pragmatic approach that there must be first the economic growth before focusing on environmental protection.3 Unfortunately this approach still dominates the Czech politics and adversely affects the Czech performance in meeting the obligations arising from the EU membership,
* The author is an Assistant Professor of Environmental Law at the Law School, Palacky University in Olomouc, Czech Republic. This paper is the outcome of the author's Fulbright-Masaryk Scholarship Visit at Washington and Lee University Law School in Lexington, VA. The author would like to thank the Fulbright Commission for financial support and Russell Miller, Maxim Tomoszek, Dan Strong, Cameron Tommey and Jamison Shabanowitz for their comments and support in writing and finishing this paper. 1. See Petr Jehlicka & Jan Kara, Ups and Downs of Czech Environmental Awareness and policy: Identifying Trends and Influences, 4 REGIONAL POLITICS & POLICY 153 (Mar. 1994) (noting that the barriers to environmentally friendly practices no longer faced barriers after the 1989 revolutionary changes). 2. See id. at 161–63 (indicating an institutional change in the early 1990s including an investment in environmental causes). 3. See id. at 163 (describing how the split of Czechoslovakia had negative implications on environmental efforts because the economic reform was not positive for the economic structure).
451 452 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) namely the obligation to implement the EU environmental law.4 After more than twenty years of applying EIA, the Czech law is still not in compliance with the EU law.5 For more than ten years Czech politicians have successfully resisted the need for compliance with the EU requirements on public participation and access to justice.6 This active resistance is subject of relentless criticism from the environmental non-governmental organizations (“NGOs”) and lately also from the EU Commission.7 The Czech attitude towards its EU membership duties can be characterized by one Czech proverb that gained popularity during the Soviet rule: to trick the regime, act cunningly so as the hungry wolf fills up but the goat he wanted to eat remains unharmed.8 In this respect the Czechs often act as though they have fulfilled all their duties properly (so the hungry wolf filled up), but nothing has in fact changed (the goat remained whole). This article traces development of environmental impact assessment law in the Czech Republic during its preparation for the accession to the EU and then during EU membership and uses an example of environmental impact assessment law to show how the post-communist legacy lead the Czech Republic from an ambition to be a leader in
4. See John F. Casalino, Shaping Environmental Law and Policy of Central and Eastern Europe: The European Union’s Critical Role, 14 TEMP. ENVTL. L. & TECH. J. 227, 252–53 (1995) (emphasizing that environmental reforms and political agendas changed with the predominance of economies along with the reduction of resources from external programs). 5. See László Szegedi, The Eastern Way of Europeanisation in the Light of Environmental Policymaking? Implementation Concerns of the Aarhus Convention-related EU Law in Central and Eastern Europe, 1 ELTE L.J.117, 130 (2014) available at http://eltelawjournal.hu/wp- content/uploads/2014/10/8_Laszlo_Szegedi.pdf (explaining that post- accession compliance still plagues the Czech Republic as indicated by recent CJEU case law and the Compliance Committee) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 6. See id. (stating that the CJEU held that “due to the general restrictive practice based on the procedural legislation of the Czech Republic—only a part of public concern had access to judicial review in environmental matters.”). 7. See id. (describing that NGOs could only state infringement of procedural rights as indicated in the European Commission action against the Czech Republic). 8. See id. (explaining that the Czech Reupblic never made climate change policy a high priority and only part of the public had access to judicial review in environmental matters). HOW LONG CAN THE WOLF BE TRICKED? 453 environmental policymaking to a position of a laggard.9 It concludes that for the post-Communist countries, such as the Czech Republic, the EU membership plays an important role of a stabilizing factor and the only driving force for enhancing environmental standards.10
Table of Contents
I. Introduction ...... 453 II. Czech Republic Before and After the Velvet Revolution (1989) ...... 458 A. During Communist Regime (1948 – 1989) ...... 459 B. High Hopes and Hard Realities (1990s) ...... 462 C. Joining the EU and Beyond ...... 466 D. Communist Legacy and Post-Communist Culture .... 470 III. Environmental Impact Assessment in the EU ...... 472 A. Context ...... 474 B. EU Directive on Environmental Impact Assessment ... 477 IV. Czech EIA Law ...... 486 A. EIA Act of 1992 ...... 486 B. EIA Act of 2001 ...... 491 B. Czech EIA Act Under Fire? (C-378/09, ACCC/2010/50 and infringement no. 2013/2048) ...... 498 C. New Amendment of the Czech EIA Law: Major Problems Finally Addressed? ...... 503 VIII. Conclusion ...... 506
I. Introduction
Behind every law there is more than just words of legal rules, there is a story and a context in which that particular law was adopted.11 Since 1992, Environmental Impact
9. See id. at 133–34 (asserting that the implementation of EIA regulations were reduced to a restrictive use or interpretation, which resulted in backsliding in certain areas). 10. See id. at 118 (explaining a theory that the adoption of EU- related laws did not always correlate with the transposition of such laws and that EIA can indicate whether post-Communist regimes are capable and willing to fulfill post-accession requirements in their public- participations and decision-making). 11. See Economic Aspects of Sustainable Development in Czech Republic, SUSTAINABLE DEVELOPMENT (April 1997), http://www.un.org/esa/agenda21/natlinfo/countr/czech/eco.htm (describing the story of environmental legislation in the Czech Republic, which began in
454 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Assessments have been recognized globally as one of the most important tools for integrating environmental considerations into decision-making.12 Moreover, the environmental impact assessment creates opportunities for citizens, local communities and non-governmental organizations representing public to express their concerns when a project with negative impacts on environment or human health is proposed.13 By bringing all stakeholders together to express their concerns, interests and wishes the environmental impact assessment contributes to ‘good governance’ and by integrating public participation requirements it serves as a democracy indicator.14 The idea of environmental impact assessment comes from the U.S. National Environmental Policy Act of 1969 (“NEPA”) which introduced the requirement that all federal agencies prepare detailed environmental impact statement for each major federal action significantly affecting the quality of human environment.15 The U.S. environmental impact assessment spread all over the world.16 NEPA inspired the European Economic Community (“EEC,” now “EU”) to adopt the 1990s, as provided by the Government of the Czech Republic to the 5th session of the United Nations Commission on Sustainable Development) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 12. See United Nations Conference on Environment and Development, June 3-14, 1992 The Rio Declaration on Environment and Development, Principle 17, U.N. Doc. A/CONF.151/26 (“Environmental impact assessment, as a national instrument, shall be undertaken for proposed activities that are likely to have a significant adverse impact on the environment and are subject to a decision of a competent national authority.”). 13 See United Nations Conference on Environment and Development, June 3-14, 1992 The Rio Declaration on Environment and Development, Principle 10, U.N. Doc. A/CONF.151/26 (noting that all concerned citizens should participate in handing environmental issues). 14. See Szegedi, supra note 5, at 117, 120 (stating that environmental impact assessment can broaden the “worlds of compliance” model and channel post-Communist administrative regimes into a decision- making process of public participation). 15. See National Environmental Policy Act of 1969 §102(C), 42 U.S.C. § 4331 (2014) (“[A]ll agencies of the Federal Government shall . . . include in every recommendation or report on proposals for legislation and other major Federal actions significantly affecting the quality of the human environment, a de- tailed statement by the responsible official . . . .”). 16. See Jennifer C. Li, Environmental Assessments in Developing Countries: An Opportunity for Greater Environmental Security? United States Agency of International Development, Working Paper No. 4, 1 (2008) (explaining that the Environmental Impact Assessment began in the United States and was adopted by the rest of the world). HOW LONG CAN THE WOLF BE TRICKED? 455 the Environmental Impact Assessment Directive17 (“EIA Directive”) in 1985 although at that time the EEC had no explicit authority to adopt environmental legislation.18 By unanimous vote among the EEC Member States, the adoption of the EIA Directive was justified by the fact that divergence of environmental impact assessments in the Member States may produce disparities in investment conditions and create distortions of competition with negative effects on the functioning of the common market.19 From the beginning, the environmental impact assessment in the EU is more a “flexible procedure designed to ensure consideration of environmental effects by both the sponsor of a project and the competent national authority” rather than “a notion of an impact statement contained in a single document.”20 Adopting the EIA Directive was one of the smartest and boldest moves the European Union has ever done in improving environmental decision-making.21 In 2003, the EIA Directive was significantly amended in regards to the public participation, primarily due to the ratification of the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (“Aarhus Convention”) by the EU.22 The ratification of
17. See Council Directive 85/337 of 27 June 1985 on the Assessment of the Effects of Certain Public and Private Projects on the Environment, 5, 7, 40–48 (1985) (discussing the EU’s environmental protection plants resulting in Environmental Impact Assessment). 18. See Howard L. Brown, Expanding the Effectiveness of the European Union’s Environmental Impact Assessment Law, 20 B.C. INT’L & COMP. L. REV. 313, 351–52 (1997) (noting that the 1957 Treaty of Rome established the EEC and implicitly recognized EU authority over environmental issues). 19. See Commission Proposal for a Council Directive Concerning the Assessment of the Environmental Effects of Certain Public and Private Projects, Point 10 at 5, COM(80) 313 final, (June 27, 1985). 20. Compare Louis L. Bono, The Implementation of the EC Directive on Environmental Impact Assessments with the English Planning System: A Refinement of the NEPA Process, 9 PACE ENVTL. L. REV., 155, 155– 86 (1991), with William Murray Tabb, Environmental Impact Assessment in the European Community: Shaping International Norms, 73 TUL. L. REV. 923, 923–60 (1999) (comparing the environmental impact assessment in the U.S. and EU). 21. See William Murray Tabb, Environmental Impact Assessment in the European Community: Shaping International Norms, 73 TUL. L. REV. 923, 929 (1999) (stating that the EIA Directive was an important step in international practices of environmental assessments). 22. See Szegedi, supra note 5, at 123–24 (asserting that the EU law is mobilized as an international fight against global problems through the Aarhus Convention). 456 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) the Aarhus Convention and implementation of its requirements into the EIA Directive was a turning point in ensuring environmental justice and “good governance” all over the EU.23 The environmental impact assessment was incorporated into the Czech law during the enthusiastic early 1990s with the aim to be ahead with the implementation of the EU law before the EU accession.24 Since the split of Czechoslovakia in 1993 till today, the Czech Parliament merely implemented the EU law.25 Moreover, as this article attempt to show, meeting the requirements of proper and correct implementation of EU environmental law usually takes the Czech Republic more time than mandated, and when it comes to granting rights to the citizens it takes a lot of effort from the EU Commission to force the Czech Republic to comply with the EU standards.26 Although the initiative of the first Czech minister for environment, Josef Vavroušek, led to the adoption of the Aarhus Convention, which the Czech Republic signed in 1998, the implementation of its standards, mandated later by the EU via the 2003 amendment of the EIA Directive, is still disputed and opposed by many influential groups.27 The Czech politicians long neglected or even ignored the notices from the
23. See Jona Razzaque, Environmental Governance in Europe and Asia: A Comparative Study of Institutional and Legislative Frameworks, 1 (2013) (“[a]t the heart of any ‘good governance’ is the engagement of public and inclusive decision-making process with transparent and accountable policies to reconcile differences among various interest holders . . . .”). 24. See Casalino, supra note 4, at 248 (describing that the Czech Republic adopted legislation conforming with the European Agreements). 25. See id. at 227 (noting the Central and European Eastern Countries including the Czech Republic entered into European Agreements to become EU members and must develop environmental legislation based on EU law). 26. See id. at 249–54 (describing the difficult problems associated countries encounter in implementing and enforcing environmental protection based on EU policy such as inadequate policy and regulatory frameworks, poor monitoring systems, human resource and institutional weakness, changing political agendas and insufficient awareness of environmental issues, and scarce financial resources). 27. See Council Directive 2003/35, 2003 O.J. (L 156) (EC) (seeking to align the provisions on public participation with the Aarhus Convention on public participation in decision-making and access to justice in environmental matters); see also Jennifer C. Li, supra note 16, at 4 (stating that EIA’s scope quality, public participation, and actions are debated worldwide). HOW LONG CAN THE WOLF BE TRICKED? 457
EU Commission that the Czech EIA legislation was not in compliance with the EU law till the European Court of Justice in 2010 made it clear in its judgment.28 The shortcomings of the Czech law were also reiterated by the Aarhus Convention Compliance Committee in 2012.29 Finally in 2013, the Commission initiated the infringement procedure in which the Czech Republic faces high financial penalties along with a threat to lose access to substantial amount of the EU funds for the ongoing and future major projects such as traffic infrastructure.30 Under such circumstances the Czech government proposed a bill that would mend all the deficiencies.31 But will it finally address them for the sake of all stakeholders?32 This article analyzes experience of the Czech Republic as a post-communist EU Member State with implementation of the EU environmental law and argues that in case of the Czech Republic the main reasons for struggling with the duty to implement the EIA Directive result from its post- communist culture that creates: (1) a disrespect for law and overly critical attitude towards the European Union; (2) diminishing value of civil society and treating the active citizens as a irreconcilable opposition, not a partner; and (3) a lack of constructive communication among politicians, administrative authorities, and all stakeholders (citizens,
28. See C-378/09, Comm’n v. Czech Republic, 2010 E.C.R. I- 00078 (holding against the Czech Republic for failing to transpose Article 10a(1-3) of the Council Directive). 29. See Meeting of the Parties to the Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, United Nations Economic and Social Council, ECE/MP.PP/C.1/2012/11, at 2 (June 29, 2012) available at http://www.unece.org/fileadmin/DAM/env/pp/compliance/C2010- 50/Findings/ece_mp.pp_c.1_2012_11_eng.pdf (stating that the Czech courts held that provisions of the Aarhus Convention cannot be directly applicable) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 30. See European Parliament, Infringement No. 2013/2048, Comm’n v. Czech Republic, 2013 available at http://www.europarl.europa.eu/sides/getAllAnswers.do?reference=P-2014- 006493&language=EN (stating that the Commission opened the infringement, and that the Court of Justice will carry out the procedure as soon as possible to identify the impact on the environment). 31. See Zákon č. 39/2015 Sb. (Czech) (amending Czech licensing proceedings and involving more public participation and changing Czech Environmental Impact Statement laws to comply with EU EIA law). 32. See Szegedi, supra note 5, at 117 (outlining the “Europeanisation” of post-communist countries by assessing the impact of EU requirements specifically the EIA and the Aarhus Convention). 458 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) businesses, etc.).33 The EIA is publicly presented as a mere “hurdle” for the execution of various projects that needs to be overcome.34 As a result of these practices, the implementation of the EIA Directive especially in regards to the public participation seems to be a formal sham.35 On a deeper level, it mirrors that the Czech political culture is still immature and sometimes far from the ideals of democracy.36
II. Czech Republic Before and After the Velvet Revolution (1989)
Czech Republic is a medium-sized country37 located in Central Europe. Prior to 1918 the Czech lands38 were part of the Austrian-Hungarian Empire, and they represented the most economically developed part of the Empire.39 After the collapse of the Austrian-Hungarian Empire in 1918, the independent Czechoslovakia came into existence.40 In the
33. See Casalino, supra note 4, at 247–54 (discussing the success and obstacles of the EU in directing the environmental laws of Associate Member States). 34. See id. at 253–54 (explaining that the EU funds certain projects while the country is responsible for environmental compliance). 35. See id. at 245 (describing the problem with the EU’s role in shaping environmental policy). 36. See id. at 251 (outlining the issues with Eastern European regulatory and enforcement frameworks). 37. See EUROPEAN ENVIRONMENT AGENCY, COUNTRY FACTSHEET ON SUSTAINABLE CONSUMPTION AND PRODUCTION POLICIES: THE CZECH REPUBLIC 4 (2010) (noting that the Czech Republic has slightly over 10 million inhabitants and area of approximately 78000 square kilometers) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 38. See Jaroslav Rousar, The Czech Republic and Its Professional Armed Forces, MINISTRY OF THE CZECH REPUBLIC 7 (2006) available at http://www.army.cz/images/id_7001_8000/7420/crapa-en.pdf (stating that the Kingdom of Bohemia, Margraviate of Moravia and Duchy of Silesia were three “Czech” lands of the Austrian-Hungarian Empire) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 39. See Petr Jehlicka & Jan Kara, supra note 1, at 154 (emphasizing that the developed parts of the Austro-Hungarian empire became what is the old industrial region). 40. See Katarina Mathernova, Czecho? Slovakia: Constitutional Disappointments, 7 AM. U. J. INT’L. L. &POL’Y. 471, 473–74 (1992) (stating that the first Czechoslovakian Republic came into being); see also Rousar, supra note 38, at 26 (conveying that the representatives of the Czech lands, namely Tomas Masaryk, had to cooperate with representatives of Slovak lands, to be able to make a case for their independence in a common state). HOW LONG CAN THE WOLF BE TRICKED? 459 inter-war period, Czechoslovakia was able to maintain democracy and was one of the leading industrial countries in Europe.41 After World War II, Czechoslovakia fell into the Soviet sphere of influence and the communist party seized political power for forty years.42 This chapter provides historical, political, and cultural context for the Czech Republic’s current performance in EU membership duties, which is deeply influenced by the legacy of the forty years of totalitarian regime.43
A. During Communist Regime (1948 – 1989)
Since 1948 Czechoslovakia experienced an authoritarian regime with a centrally planned and controlled economy oriented on rapid expansion of heavy industry basically at any expense.44 The heavy industry was fuelled by low-quality brown coal and lignite.45 Unlike in other communist countries (e.g. Poland),46 private property in Czechoslovakia was confiscated, officially banned by the 1960 Constitution,47 and practically reduced only to housing and personal property.48 All the farmland was declared to be part of collective property managed by the united agricultural cooperatives (jednotná zemědělská družstva).49 The state
41. See Petr Jehlicka & Jan Kara, supra note 1 at 154; see also Andrzej K, Kozminski, Restitution of Private Property: Re-privatization in Central and Eastern Europe. 30 COMMUNIST AND POST-COMMUNIST STUDIES 95, 99 (1997) (noting that Czechoslovakia remained capitalistic and democratic). 42. See Kozminski, supra note 38, at 99 (describing how the communist coup in Czechoslovakia happened in 1948). 43. See Petr Jehlicka & Jan Kara, supra note 1, at 153 (“The geopolitical settings (including the influence of the EU) with their important environmental dimension seemed to serve as a stabilizing factor in this respect; that have no allowed the ‘pendulum’ to swing back fully.”). 44. See id. at 155 (stating that beginning in 1948 the country experienced an authoritarian regime). 45. See Petr Pavlínek, Czech Republic, in Frank Carter & David Turnock, ENVIRONMENTAL PROBLEMS IN EAST-CENTRAL EUROPE 119 (2nd ed, 2001) (describing how the heavy industry was fueled). 46. See Kozminski, supra note 38, at 96 (1997).(describing the anti-private ownership campaigns in other communist countries). 47. See Ústavní zákon ze dne 11. července 1960 č. 100/1960 Sb., Ústava Československé socialistické republiky [Constitution of the Czechoslovak Socialist Republic]. 48. See Kozminski, supra note 38, at 96–97 (1997) (describing the waves of expropriations and confiscations). 49. See id. at 96 (noting that farmland was often owned collectively). 460 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) owned all natural resources (forests, water, and mineral resources), means of industrial production (factories), mass transportation and post offices, banks and insurance companies, radio, television, film industry, medical care facilities, schools, and scientific institutes.50 Private undertaking was not allowed.51 The regime systematically worked on elimination of elites and intelligence and intentionally destroyed social hierarchy.52 The socialist state ruled by the communist party built a social security net for all of its citizens. Everybody had a job53 and wages were not high, but people could make a living. People “knew they would be hospitalized if needed and would receive cheap or free medication. Their children could go to school and even to university for free, and at age of 55 – 60, or earlier if necessary, they could retire with a modest but guaranteed pension.”54 With the exception of Nature Protection Act of 1955/1956,55 the legislation that would deal with environmental protection was not on the agenda.56 During 1960s Czechoslovakia faced stagnation of economic growth, so the reforms were urged. Then during the late 1960s and early 1970s the first signs of serious environment degradation began to show up.57 Attention that the environmental deterioration was catching among the citizens alarmed the regime leaders because “inability to redress environmental problems undermined the legitimizing claim of Communist rule to be the guarantor of human well-being.”58
50. See Constitution of the Czechoslovak Socialist Republic art. VIII part 2. 51. See Kozminski, supra note 38, at 99 (describing the legislation’s attack on privatization). 52. See id. at 99 (explaining the way the system got rid of social hierarchy). 53. See Constitution of the Czechoslovak Socialist Republic art. VIII part 2. (stating that everybody had to work under the threat of criminal punishment for social parasitism (příživnictví)). 54. Ivan T. Berend, Social Shock in Transforming Central and Eastern Europe. Communist and Post-Communist Studies 270, 275 (2007). 55. See Jehlicka, supra note 1, at 156. 56. See id. 57. See id. at 155 (noting that up to 1960 there was economic development without addressing environmental problems and in the 1960s the first signals of degradation appeared). 58. Susan Baker & Petr Jehlička, Dilemmas of Transition. The Environment, Democracy and Economic Reform in East Central Europe 9 (1998). HOW LONG CAN THE WOLF BE TRICKED? 461
So the regime started to adopt environmental legislation that would address the pressing environmental problems to legislate them away because the environmental pollution did not fit the socialist ideology.59 Along with the relatively liberal mood of the 1960s, the Public Health Act of 1966,60 Act on Protection of Farmland61 and the Air Purity Act of 196762 were adopted. Despite the events of 1968 (Warsaw pact armies’ invasion of Czechoslovakia) that radically suppressed liberalization of Czechoslovakia, other environmental laws were passed, namely Water Act of 197363 and Forestry Act of 1977.64 But no matter how strict the environmental laws during the communist regime were, they were basically ineffective for two reasons.65 Every strict rule was followed by exceptions rendering it virtually ineffective and there was a lack of enforcement (or will to enforce). 66 Obviously when all environmental pollution came from the state owned factories (because there were no other than state owned) and state activities the environmental laws were not only unenforced, they were systematically ignored.67 As Pavlínek aptly describes, the communist government “had not been efficient in enforcing its own strict pollution limits. The state socialist planners had always considered production to be primary and feared that too much environmental consideration would endanger the plan fulfillment.”68 The environmental crisis culminated in the early 1980s and the regime could no longer keep the call unanswered, primarily because the communists realized that environmental disaster could threaten the regime’s survival.69
59. See Ruth Greenspan Bell, Environmental Law Drafting in Central and Eastern Europe, 22 E.L.R. 10597 (1992) available at http://elr.info/sites/default/files/articles/22.10597.htm. 60. See Zákon č. 20/1966 Sb., o péči o zdraví lidu. 61. See Zákon č. 53/1966 Sb., o ochraně zemědělského půdního fondu. 62. See Zákon č. 35/1967 Sb., o opatřeních proti znečišťování ovzduší. 63. See Zákon č. 138/1973 Sb., o vodách. 64. See Zákon č. 61/1977 Sb., o lesích. 65. See Jehlicka,, supra note 1, at 156–57. 66. See id. at 156. 67. See id. at 158 (explaining that the activities were not completely illegal and people could ignore them). 68. Frank Carter & David Turnock, Environmental Problems in East-Central Europe 119 (2nd ed. 2001). 69. See Interview with Petr Pavlínek, The Communist and the Environment: Was it All Bad?, RADIO PRAHA (Aug. 8, 2003),
462 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Despite all the efforts to limit pollution, by 1989 Czechoslovakia had the worst environmental conditions in Europe and one of the most devastated environments globally.70
B. High Hopes and Hard Realities (1990s)
The so-called Velvet Revolution71 that took place in November 1989 started the process of transformation and strong yearning for the West.72 The accession to the European Union was perceived as the “only chance to modernize and enter the system of Western values” and “a national priority and strategic goal”.73 The change of political regime gave rise to many hopes and expectations.74 Ivan T. Berend accurately describes that “[p]eople and politicians felt that their country deserved immediate acceptance by the EU. They felt that financial aid and help to reach Western living standard should be forthcoming. They nurtured idealistic views about the West. They admired attractive consumerism, rich supply and high living standard.”75 People hoped that the Western economic success can be instantly replanted in Czechoslovakia and expected that new democracy will bring greater living
http://www.radio.cz/en/section/curraffrs/the-communists-and-the- environment-was-it-all-bad (“[T]he regime actually realized in the early 1980s the danger that the environmental disaster could pose for its long- term survival. So actually in about the mid-1980s the regime decided to spend a lot of money to improve the environment . . . And I would also argue that some of the successes in the environmental clean-up that we saw in the early 1990s were based on the policies that were initiated by the communist government.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 70. See FRANK CARTER & DAVID TURNOCK, ENVIRONMENTAL PROBLEMS IN EAST-CENTRAL EUROPE 119 (2d ed. 2001). 71. See TONY JUDT, POSTWAR: A HISTORY OF EUROPE SINCE 1945, at 620 (2006) (describing the Velvet Revolution of 1989 was a non- violent transition of power from one-party communist regime to democracy that took place in the former Czechoslovakia in November 1989). 72. See id. 73. Bogdan Góralczyk, The EU Accession and Euro-Atlantic Integration of Central and Eastern European Countries 2 Y.B. POLISH EUR. STUD., 57, 57–58 (1998). 74. See Ivan T. Berend, Social Shock in Transforming Central and Eastern Europe, 40 COMMUNIST AND POST-COMMUNIST STUDIES 271 (2007) (explaining the rise of exaggerated expectations of post-communism “transformation fatigue”). 75. Id. HOW LONG CAN THE WOLF BE TRICKED? 463 standard for all.76 In terms of environmental quality, the change of regime was perceived as an opportunity to “hit the ground running,” i.e. clean up the environment building on experience from the Western democracies and avoiding costly mistakes to find a new, better path toward sustainable development.77 From 1990 till 1992, many important environmental statutes were passed on both federal and state level. The main reason why the environmental drafting was so plentiful in the early 1990s was: (1) the urging need to deal with the communist past “once and for all” and (2) the active political role of environmentalists.78 The communist regime did not persecute the environmentalists as harsh as e.g. human rights activists so they were ready to get involved in politics when the Velvet Revolution came.79 However the general concern for the environment and the active political participation of environmentalists did not last long and was soon replaced by more pragmatic approach.80 The whole society was shattered by hard consequences of regime change, and the initial euphoria was replaced by huge disappointment, partially because the expectations people had were exaggerated.81 The transition to constitutional democracy, market economy, and development of functional democratic government and civil society were not going to happen “overnight.”82
76. See id. (noting that people disbelieved negative propaganda about capitalism and wanted the Western-living standard). 77. See Margaret Bowman & David Hunter, Environmental Reforms in Post-Communist Central Europe: From High Hopes to Hard Reality, 13 MICH. J. INT’L L. 921, 924 (1991-1992) (urging new lawmakers to develop systems that would make laws work to invest in democracies and the environment). 78. See Petr Jehlicka & Jan Kara, supra note 1, at 159 (indicating that the public was more aware of environmental issues after 1989 and the Green party asserted itself concerned with the devastation of the Bohemia area). 79. See id. at 158 (stating that people wanted to be involved because of personal passion against the degradation of the environment). 80. See id. at 160 (noting that he pragmatic period of environmental policy began after the 1992 elections along with the economic reforms). 81. See id. at 159 (detailing the change from a loose movement to a central movement and a loss of interest after advocates were not effective.). 82. See id. at 161–63 (summarizing the changes in the institution and legislation while environmental concern changed). 464 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
With the vision to join the EU as soon as possible, the law was changing too rapidly and legal system was not ready.83 As Zdeněk Kühn points out, “[t]he mixture of often incompetent drafting of post-communist law, the immaturity of post-communist legal systems and judges adhering to textual positivism, has produced a deepening of the post- communist legal crisis.”84 In other words, Czechoslovakia was just like other post-communist countries in the Central and Eastern Europe confronted with hard reality of restructuring the whole economic, political, and social system.85 With this overwhelming task “a decrease in popular concern for the environment and increasing political pressure to delay any new environmental protection measures until the economy improves. For many environmentalists in the region, the high hopes for developing an environmentally sustainable economic system have been replaced with the desire simply to put some environmental controls in place and worry about improving the system later.”86 The elections to the Czech National Council in June 1992 clearly demonstrated a shift from politics based on high values to a more pragmatic approach which assumes environmental quality depends on economic prosperity and the economy had to be fixed first.87 It is sad that even 20 years later the race for economic prosperity is still dominating Czech politics even though recent economic data shows that the Czech Republic is economically indistinguishable from
83. See Joann Carmin & Stacy D. Vandeveer, Enlarging EU Environments: Central and Eastern Europe from Transition to Accession, 13 ENVIRONMENTAL POLITICS 3, 11 (2004) (emphasizing that states and structures did not have the necessary resources to make the required changes as highlighted by environmental issues). 84. Zdeněk Kühn, The Application of European Law in the New Member States: Several (Early) Predictions, 6 GERMAN L. J. 563, 564 (2005); see also Mark N. Salvo, Constitutional Law and Sustainable Development in Central Europe: Are We There Yet? 5 S. C. ENVTL L. J. 141 (1996-1997). 85. See Mark N. Salvo, Constitutional Law and Sustainable Development in Central Europe: Are We There Yet? 5 S. C. ENVTL L. J. 141, 149 (1996-1997) (asserting that the entire region formerly Eastern Europe is struggling with the legal framework for sustainability). 86. Bowman and Hunter, supra note 77, at 924. 87. See Adam Fagin, Environmental protests in the Czech Republic: three stages of post-communist development [draft], UNIVERSITY OF PORTSMOUTH (1999) available at http://ecpr.eu/Filestore/PaperProposal/16429f9b-b049-450f-89ca- 4967b342ea04.pdf (discussing the history of environmental protest in the Czech Republic after communism) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). HOW LONG CAN THE WOLF BE TRICKED? 465 other countries at comparable stages of economic development.88 In the 1990s, Czech society, used to egalitarian social security net from the times of the Communist regime, struggled with unemployment, lower income, fall of the GDP level, rise of consumer prices, and decline of agricultural production.89 Privatization of the state enterprises in particular led to increased unemployment rates and resulted in strengthened power of the “old elites” often referred to as “dinosaurs” or nomenklatura. 90 A new rich class emerged, which was painful for those who struggled with poverty because they expected that the events of 1989 would bring immediate improvement of living standard for everybody.91 The economic hardship that hit the majority of people resulted in deep disappointment, public skepticism about the reform process, and a craving for the security of the previous regime.92 This political environment created the opportunity for the rise of Communist successor parties who gained support by blaming capitalism and the reforms for all existing problems.
88. See Andrei Shleifner & Daniel Treisman, Normal Countries: The East 25 Years After Communism, (2014) available at http://www.foreignaffairs.com/articles/142200/andrei-shleifer-and-daniel- treisman/normal-countries (looking at the development of Eastern European countries after the fall of communism) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 89. See Vaclav Klaus, The Economic Transformation of the Czech Republic: Challenges Faced and Lessons Learned, CATO INST., (2006) available at http://www.cato.org/publications/economic-development- bulletin/economic-transformation-czech-republic-challenges-faced-lessons- learned (summarizing the history of the Czechs after the fall of communism) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 90. See Montree Patthamadilok, A Decade of Conflicts in Czech Economic Transformation, J. OF ECON. ISSUES 315, 315 (1999) (explaining the economic issues of post-communist Czechoslovakia) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 91. See Susan Baker & Petr Jehlicka, Dilemmas of Transition: The Environment, Democracy and Economic Reform in East Central Europe 5 (1998) (discussing the expectations of the working class during the political reform of the 1990s). 92. Id. 466 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
C. Joining the EU and Beyond
Accession to the European Union for post-communist countries like the Czech Republic was not only important from an economic perspective of joining the single European market but also symbolic in terms of separating from the communist past.93 Czechoslovakia started to negotiate an association agreement with European Communities shortly after the 1989 political regime change.94 The first association agreement95 between the Czechoslovakian Federal Republic, the European Communities, and EC Member States was signed on December 16, 1991 and was approved by the EC Council in February 1992.96 However, it was never ratified by Czechoslovakia because of the division of the country into two independent states in 1993.97 One of the successor states, the Czech Republic, signed the association agreement (the so- called Europe Agreement)98 in October 1993 and it entered into force on February 1, 1995.99 The European Agreement between the EC and the Czech Republic laid down in Article 69 that “the major precondition for the Czech Republic’s economic integration into the Community is the approximation of the Czech Republic’s existing and future legislation to that of the Community. The Czech Republic shall endeavor to ensure that
93. See John Phillips & Jerry Wheat, The Hidden Business Costs of European Union Enlargement: The Case of the Czech Republic, 3 INT’L BUS. & ECON. RESEARCH J. 27, 30 (2004) (explaining the costs and benefits of the Czech Republic joining the European Union). 94. See id. at 27 (noting that the European Union began negotiations for many treaties with former Communist countries around 1989). 95. See Tom Lansford, Political Handbook of the World 2014 376 (2014) (giving an overview of the political history of the Czech Republic and other countries). 96. See id. (noting the status of the first attempted association agreement). 97. See id. (mentioning the split of the Czechoslovak Federal Republic into two distinct countries). 98. See Rojer J. Goebel, Joining the European Union: The Accession Procedure for the Central European and Mediterranean States, 1 Int'l L. Rev. 15, 22 (2004) (noting that Europe Agreements were a standard form for the pre-accession arrangements with candidates for EC membership and that such standard forms were devised by the EC Council in 1991). 99. See Lansford, supra note 95 (summarizing the complicated process of the Czech Republic joining the European Union). HOW LONG CAN THE WOLF BE TRICKED? 467 its legislation will be gradually made compatible with that of the Community.”100 Article 70 of the European Agreement specified in which particular areas the approximation of laws shall take place and included, among other EC law in the area of the environment, protection of human health and life, animals and plants, and consumer protection.101 The European Agreement established the official Association of the Czech Republic with the European Community.102 The associated countries were required to satisfy certain conditions for the accession to the EC.103 These conditions are known as “Copenhagen Criteria” and are commonly categorized into three groups: (1) political (stability of institutions guaranteeing democracy, rule of law, human rights and respect for human rights, and protection of minorities); (2) economic (functioning market economy and capacity to cope with competitive pressure and market forces with the European Union); and (3) relating to the policies and infrastructure (the ability to take on the obligations of membership including adherence to the aims of political, economic and monetary union).104 The associated countries had to satisfy the political criterion before the opening of the accession negotiations.105 The accession negotiations with the Czech Republic along with the other eight associated countries were opened in early 1997.106 The final two criteria were to be satisfied by the end of the negotiations.107 Regarding the economic criterion, the Commission in its report “Agenda 2000 – For a Stronger and Wider Union”108 published in 1997, concluded that “[t]he applicant countries have made considerable progress in the
100. Europe Agreement Between the European Communitites and the Czech Republic art. 69, Oct. 4, 1993, 34 I.L.M. 3. 101. Id. at art. 70. 102. Id. 103. See Rojer J. Goebel, Joining the European Union: The Accession Procedure for the Central European and Mediterranean States, 1 INT’L L. REV. 15, 22 (2004) (discussing the requirement procedures for accession). 104. See id. at 24, 29 (discussing the various conditions that needed to be met during negotiations to gain admittance into the EC). 105. See id. (noting the requirements of admittance to the EC). 106. See id. (mentioning the timing of the negotiations between the Czech Republic and the EC). 107. See id. (going over the final two criteria and when they had to be met). 108. European Commission, AGENDA 2000 For a Stronger and Wider Union, BULLETIN OF THE EUROPEAN UNION, Supp. 5/97 (2000). 468 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) transition to a market economy, including with privatization and liberalization, although their economic situations vary considerably. For all of them the break-up of the CMEA, the former Communist trading bloc, and the beginning of market reforms implied a major initial shock.”109 Due to economic mismanagement and reckless fulfillment of the plan dictated from Moscow, the average Czech GDP per inhabitant in 1997 was still only one third of the EU average.110 The Agenda 2000 concluded that the Czech Republic did not satisfy either of the two economic criteria.111 Under such circumstances one can imagine how enormous an effort had to be placed in meeting the economic criteria for the EU accession. The third criterion required the candidate countries to have adequate administrative and judicial infrastructure for the aims of political, economic and monetary union and the ability to adopt the acquis communautaire.112 For the purposes of negotiations, the acquis communautaire was divided into 31 chapters, which the candidate countries had to “close” before the EU accession.113 The negotiations concerning the accession of the Czech Republic to the EU were opened on 31 March 1998 and were commenced by the screening of the Czech laws regarding its compatibility with the EU law and evaluation of whether the Czech Republic would be able to undertake all the EU membership obligations.114 Based on the results of the screening and evaluation, the actual talks on the terms of future Czech membership were started.115 The talks were concluded at the Copenhagen summit of the Council of Europe held on 13 December 2002.116 The Treaty of Accession of the Czech Republic to the European Union was signed on April
109. Id. 110. See id. (explaining why the Czech Republic failed the economic portion of the negotiation requirements). 111. See id. at 42 (concluding that the Czech Republic failed to meet all of the accession criteria). 112. See Rojer J. Goebel, Joining the European Union: The Accession Procedure for the Central European and Mediterranean States, 1 Int'l L. Rev. 15, 34 (2004) (explaining the concept of acquis communautaire). 113. See id. (mentioning the simplification of the process). 114. See id. (describing the process of the negotiations by the Czech Republic). 115. See id. (outlining the results and process of the overall negotiation). 116. See id. (discussing the conclusion of the negotiation talks between the Czech Republic and the EC). HOW LONG CAN THE WOLF BE TRICKED? 469
16, 2003 and the Czech Republic officially joined the EU on May 1, 2004.117 The accession to the EU required that the candidate countries adopt the whole acquis communautaire comprising several thousand legislative measures (including over 200 environmental directives and regulations) in many different fields which demanded many costly changes (institutional, legal, economic etc.).118 The financial aid became an inevitable step if the Central and Eastern European Countries were to join the EU.119 They received financial and technical help from three pre-accession funds: the PHARE Programme, SAPARD and ISPA.120 According to official documents, the Czech Republic received € 212.2 million.121 After the accession to the EU, the new Member States have been supported in the implementation of the EU environmental policy and law from the EU funds (e.g. LIFE, European Regional Development Fund, European Social Fund or Cohesion Fund).122 The Member States co-operate with the Commission on allocation of some of these funds to concrete environmental projects in terms that the funds are first transferred to the Member States whose authorities administer project selection; other funds are allocated directly
117. See id. (noting the timetable of the treaty negotiations). 118. See Patrick J. Kapios, Environmental Enlargement in the European Union: Approximation of the Acquis Communautaire and the Challenges That It Presents for the Application Countries, 2 SUSTAINABLE DEV. & POLICY 2, 8 (2002) (explaining the concept of acquis communautaire). 119. See id. (discussing the need for financial aid in order to join the EC). 120. See id. (explaining that the PHARE Programme was a pre- accession instrument financed by the European Communities to assist the candidate countries of Central and Eastern Europe to prepare for joining the EU. It was created originally in 1989 as “Poland and Hungary: Assistance for Reconstructing their Economies”, but later it expanded from Poland to Hungary to include ten countries, eight of them joined the EU in 2004 and the remaining two (Bulgaria and Romania) in 2007). 121. See Comm’n of the European Communities, Report from the Commission: General Report on Pre-accession assistance (PHARE – ISPA – SAPARD) in 2002, 844 COM 24 (2003) available at http://eur- lex.europa.eu/legal- content/EN/TXT/PDF/?uri=CELEX:52003DC0844&from=en (noting the amount of financial aid received by the Czech Republic) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 122. See Jiří Zicha & Oldřich Hájek, Právní souvislosti legislativy Evropské unie ve vztahu k Operačnímu programu Životní prostředí v České republice, 35 ČESKÉ PRÁVO ŽIVOTNÍHO PROSTŘEDÍ 39 (2014) (explaining the EU Environmental policy funding). 470 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) by the Commission.123 As of 2013, the Czech Republic has received 57 billion CZK (approx. € 2.3 billion) for environmental projects.124 However, the effect of spending these funds was lowered by the fact that the Czech Republic was not able to spend all the money allocated to it by the Commission and this trend unfortunately continues.125
D. Communist Legacy and Post-Communist Culture
The famous Polish historian and former dissident Adam Michnik once stated that “the worst thing about communism is what comes after.”126 Even though the Communist regime in the Czech Republic lasted “only” forty years, it was successful in destroying the civil society and deeply affecting peoples’ beliefs.127 The paternalistic socialist state that cherished egalitarian society with low but guaranteed living standard and well-functioning social security net “did not require much individual initiative.”128 Two generations of people who raised their children during the Communist regime were taught that if they stayed in line, everything would be just fine.129 And the Czechs did, because throughout the history they lacked courage to actively resist the oppression and fight for their independence and freedom.130 On a more personal level, people who grew up during Communism lacked skills necessary for successful performance in competitive market
123. See id. (discussing the terms of the environmental funding practices). 124. See id. (noting the amount of funds given to the Czech Republic). 125. See id. (explaining that due to problems with administering the EU funds in 2013, the Czech Republic lost 6 billion CZK (approx. € 240 million) allocated for environmental projects). In 2014 it was another 13 billion CZK (approx. € 520 million) and for 2015 it is estimated that the Czech Republic will not be able to spent another 5 billion CZK allocated for environmental projects. Id. 126. TONY JUDT, POSTWAR: A HISTORY OF EUROPE SINCE 1945, at 665 (2006). 127. See Richard Janda, Something Wicked That Way Went: Law and the Habit of Communism, 41 MCGILL L. J. 253 (1996) (explaining the true impact of communism even on countries with limited exposure). 128. Ivan T. Berend, supra note 75, at 275. 129. See id. (discussing the effects of communism on peoples‘ behavior and understanding of the world). 130. See id. (mentioning the cultural history of the Czech Republic and its impact on adapting to communism). HOW LONG CAN THE WOLF BE TRICKED? 471 economies.131 The generation who were raised during Communism also lost the sense for individual land ownership, especially for farmland.132 After the Communists confiscated all the farmland and put it into collective management of united agricultural co-ops, the people whose families had been farming for generations found jobs in factories and state- owned enterprises and gradually gave up on returning to long family living habits.133 When the land was returned to its owners after 1989, most of them either sold the land or leased it.134 The Czech experience with the Communist regime and subsequent hard times of transformation created a culture of complaint and constant discontent.135 Only a small portion of society got rich.136 The unscrupulous public appearance and activities of former members of nomenklatura, who after 1989 became active politicians or managers of privatized enterprises, kept irritating the ordinary citizens and creating begrudging feelings.137 General distrust in politics, law, and government keeps public participation in political life low and civil society weak.138 Moreover, the politicians on all levels (national, regional and local) keep the Communist habit of treating the active citizens as irreconcilable opposition and not as a partner.139 Just like in the Communist times “the citizens better stay in the line and let the politicians and authorities rule.”140 The post-communist culture in the Czech Republic also disregards the foreign authorities who are treated as the wolf in proverb “feed the wolf so as that the goat stays unharmed”
131. See id. (explaining the lasting effects of communism on a post-communist society). 132. See id. (noting the effect of communism on the concept of property and ownership). 133. See id. (summarizing the history of farmland ownership in the Czech Republic and the effect of communism). 134. See id. (mentioning the return of property after the end of communism). 135. See id. (discussing the problems faced by the people who were used to a communist society). 136. See id. (discussing the ramifications of the fall of communism in the Czech Republic and other countries). 137. See id. (mentioning the continuing actions of the elite). 138. See id. (noting the general unrest in the population after the fall of communism). 139. See id. (explaining the ill will generated by the actions of the political elite). 140. See id. (noting the continued communist policies about obeying those in power). 472 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) or in other words the Czechs participate in the European project only with a minimal effort.141 If they do what they are told (by the EU), they always try to find a way around to do it their way.142 The problems with proper implementation of the EU Directive on environmental impact assessment (“EIA Directive”) described in the chapter IV clearly show the Czech attitude towards the EU – “we like the EU money, and only if these are at stake we do what we are supposed to.”
III. Environmental Impact Assessment in the EU
An environmental impact assessment is one of the most important tools for integrating environmental considerations into decision-making. It was first introduced in the U.S. National Environmental Policy Act of 1969 (“NEPA”), and it successfully spread around the world (both horizontally to other states and vertically to international level).143 The European Community (now EU) adopted the Environmental Impact Assessment Directive in 1985 although at that time it did not have any explicit authority to adopt environmental legislation.144 There were concerns that diverging regimes of impact assessment that the EEC Member States started to introduce during 1970s and 1980s would distort the functioning of the internal market, so the EEC decided to step in and set the minimum requirements.145 The scope and extent of the original EIA Directive of 1985 expanded over time to set common standards with regard to types of projects subject to the impact assessment, duties of developers, content of the assessment, and the participation of the competent authorities and the public.146 After the 2014 amendment by the Directive 2014/52/EU, the
141. See id. (describing the complex avoidance of obeisance to an authority higher than the national level). 142. See id. (discussing the efforts of the Czech Republic to maintain supreme sovereignty). 143. See Jonathan B. Wiener, Something Borrowed for Something Blue: Legal Transplants and the Evolution of Global Environmental Law, 27 ECOLOGY L.Q. 1295, 1306 (2001) (outlining NEPA’s emergence and expansion). 144. See id. (noting the time of the adoption of EIAs). 145. See id. (explaining various concerns about EIA adoption). 146. See European Parliament, European Economic and Social Committee and the Committee of the Regions on the application and effectiveness of the EIA Directive 2 COM (2009) 378 (discussing Directive 85/337/EEC, as amended by Directives 97/11/EC and 2003/35/EC). HOW LONG CAN THE WOLF BE TRICKED? 473 current EU definition of the environmental impact assessment (EIA) is included in the Art. 1 par. 2 letter g): Environmental impact assessment means a process consisting of: i. The preparation of and environmental impact assessment report by the developer; ii. The carrying out of consultations (with the competent authorities and with the public); iii. The examination by the competent authority of the information presented in the environmental impact assessment report and any supplementary information provided, where necessary, by the developer, and any relevant information received through the consultations ad ii.; iv. The reasoned conclusion by the competent authority on the significant effects of the project on the environment, taking into account the results of the examination ad iii. and where appropriate, its own supplementary examination; v. The integration of the competent authority´s reasoned conclusion into any decisions that grant development consent (or in other words license) for the project in question.147 The EIA Directive does not cover the so-called “strategic documents,” i.e. various plans and programs. These are subject to the environmental impact assessment under the Directive 2001/42/EC (hereinafter referred to as “SEA Directive“). The SEA Directive covers only public plans and programs, unlike the EIA Directive it does not apply to private plans and programs and it does not refer to the policies.148 Besides two general regimes set up by the EIA Directive and the SEA Directive, there are several other, mostly sectorial EU directives that require impact assessment to be conducted, namely Natura 2000 Directives,149 Water
147. Id. 148. See Directive 2001/42, art. 2(a), Strategic Environmental Assessment, 2001 O.J. (L 197) (EC) (defining “plans and programs” as “plans and programmes, including those co-financed by the European Community). 149. Council Directive 2009/147, 2009 O.J. (L 20/7) (EC); Council Directive 92/43, 1992 O.J. (L 198) (EEC). 474 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Framework Directive,150 Waste Framework Directive,151 Landfill Directive,152 Industrial Emissions Directive,153 Seveso II Directive154 and Carbon Capture and Storage Directive.155 Requirements of these sectoral directives shall, on national level, be integrated into the environmental impact assessment of both projects as well as of plans and programs. To set the stage, some general features about the EU and development of its environmental policy will be mentioned to provide a necessary context for describing the EU law on environmental impact assessment.
A. Context
The EU has quite the unique character that blends supranational and intergovernmental elements. Stephen C. Sieberson describes this blend in the following way, “[l]ike an IGO [intergovernmental organization], the Union is treaty- based and is characterized by voluntary membership and unanimity requirements for treaty amendments and other key decisions. Like a vertically stacked national federation, the EU has an independent and multi-institutional central government, its laws have primacy over Member State law, and many of its legislative enactments are approved by a form of majority vote.”156 The European Court of Justice already in 1964 in the famous decision Costa v. ENEL stressed that “by creating a Community of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming from a limitation of sovereignty or a transfer of powers from the states to the Community, the Member States have limited their sovereign
150. Council Directive 2000/60, 2000 O.J. (L 327) (EC). 151. Council Directive 2008/98, 2008 O.J. (L 143/56) (EC). 152. Council Directive 1999/31, 1999 O.J. (L 182) (EC). 153. Council Directive 2010/75, 2010 O.J. (L 182) (EU). 154. Council Directive 96/82, 1996 O.J. (L 010) (EC) (explaining the control of major-accident hazards involving dangerous substances). This so-called Seveso II Directive of 1996 will be as of 1 June 2015 replaced by the Seveso III Directive – Directive 2012/18/EU on the control of major- accident hazards involving dangerous substances, amending and subsequently repealing Council Directive 96/82/EC. 155. Council Directive 2009/31, 2009 O.J. (L 211/55) (EC). 156. Stephen C. Sieberson, Inching Toward EU Supranationalism? Qualified Majority Voting and Unanimity Under the Treaty of Lisbon, 50 VA. J. INT’L L. 919, 930 (2010). HOW LONG CAN THE WOLF BE TRICKED? 475 rights and have thus created a body of law which binds both their nationals and themselves.”157 The EU exercises the powers conferred upon it by its Member States in varying extent. In some areas, the EU has an exclusive power to “legislate and adopt legally binding acts” while the Member States can do so “only if so empowered by the Union or for the implementation of Union acts.”158 In the areas where the European Union shares the legislative power with the Member States, the Member States “exercise their competence to the extent that the EU has not exercised it.”159 Once the EU legislation has been adopted, it must be applied by all national authorities, even when it has not yet been transposed into national law.160 In the case of conflict between national law and EU law, the EU law prevails because of the principle of supremacy.161 The EU must exercise its competences in accordance with the principle of subsidiarity and proportionality.162 Under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the EU shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level.163 Under the principle of proportionality, the content and form of EU action shall not exceed what is necessary to achieve the objectives of the Founding Treaties.164 The relationship between EU law and national law is also governed by the principle of sincere cooperation165 under which the EU and its Member States collaborate to achieve
157. Case C-6/64, Flaminio Costa v. E.N.E.L., 1964 E.C.R. 585. 158. Consolidated Version of the Treaty on the Functioning of the European Union art. 2, May 9, 2008, 2008 O.J. (C 115) 47. 159. Id. 160. See Paul Craig & Gráinne de Búrca, EU Law: Text, Cases and Materials 256-301 (2011) (describing in detail the supremacy principle). 161. See id. (explaining the supremacy principle in terms of the EU). 162. See id. (noting that all EU countries must follow such treaties). 163. See Craig, supra note 158, art. 5(3). 164. See id. art. 5(4). 165. See id. art. 4(3). 476 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) goals laid down by the Founding Treaties.166 The TFEU further states that “the Member States shall take any appropriate measure, general or particular, to ensure fulfillment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union.”167 The EU embraces fundamental values shared by its Member States. TFEU enumerates the basic values and objectives on which the EU is founded. One of the primary goals of the EU, expressed as early as the 1950s, is the establishment of an internal market in which the free movement of goods, persons, services and capital is ensured.168 The European Union “shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.”169 As Art. 3 par. 3 of TFEU cited above states, the environmental protection belongs to the EU objectives. European environmental policy dates back to 1970s. In October 1972, the heads of the EEC Member States and the heads of their governments met in Paris. At the Paris Summit, they agreed on the necessity to draw up the EEC environmental action program. The Statement from the Paris Summit declared, “economic expansion is not an end in itself. Its first aim should be to enable disparities in living conditions to be reduced. It must take place with the participation of all the social partners. It should result in an improvement in the quality of life as well as in standards of living. As befits the genius of Europe, particular attention will be given to intangible values and to protecting the environment, so that progress may really be put at the service of mankind . . . .” The first EEC environmental action program was adopted in the form of a joint declaration by the EEC and its Member States in 1973. Furthermore, the task force within the Commission that drew up the first action program eventually led to the formation of a Directorate General for
166. See id. (noting that the Founding Treaties are international treaties between EU Member States which establish the constitutional basis of the European Union.). 167. Id. art. 5. 168. See TFEU supra note 158, at art. 26(2) (describing the goals of the European Union). 169. Id. art. 3 par. 3. HOW LONG CAN THE WOLF BE TRICKED? 477 the Environment (the so-called “DG Environment”). So far, there are seven EU Environmental Action Programs.170 They formulate the EU environmental policy for a certain period of time. Based on Arts. 7 and 11 of the TFEU, the European Union must ensure consistency between its policies and activities and see that they integrate environmental protection requirements (integration clause).171 The EU Member States are responsible for financing and implementing them in national environmental policies.172 From a legal perspective, environmental protection did not feature in the Founding Treaties until 1987 when the Single European Act was adopted. It amended the Treaty Establishing the European Economic Community and officially introduced a new chapter on environment, which gave the EEC power to adopt environmental legislation.
B. EU Directive on Environmental Impact Assessment
The Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment (“EIA Directive”) was adopted in 1985. By the time the EIA Directive entered into force (1988), there were twelve Member States of the EEC who had to implement it. Before the EIA Directive was adopted, several Member States (United Kingdom, Ireland, Germany, Denmark, France and Luxemburg)173 introduced various models of impact assessments and the Commission was concerned that different rules would distort the competition and would adversely affect the functioning of the common market. The EIA Directive was based on the Commission´s proposal from 1980174 which referred to the first two environmental action programs adopted in 1973 and 1977.
170. See Decision No 1386/2013/EU of the European Parliament and of the Council of 20 November 2013 on a General Union Environment Action Programme to 2020 'Living well, within the limits of our planet,' OJ L 354 (2013) (discussing how the 7th Environmental Action Program guides the EU environmental policy from 2014 to 2020). 171. See Thomas Schumacher, 3 ENVTL. L. REV. 29, 29–43 (2001) (discussing integration clause of the Art. 11 TFEU). 172. See TFEU, supra note 158, art. 192(4). 173. See Proposal for a Council Directive Concerning the Assessment of the Environmental Effects of Certain Public and Private Projects. COM(80) 313 final 6–7. 174. Proposal for a Council Directive Concerning the Assessment of the Environmental Effects of Certain Public and Private Projects. COM(80) 313 final. 478 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
The proposal specifically highlighted the need to anticipate and take into account environmental concerns when the public authorities license public or private projects with negative impacts on the environment. It also emphasized that the economic activities and population put an increasing pressure on natural resources and result not only in pollution but due to poor land-use management also in industrial accidents.175 Under such conditions, the system of regulatory instruments (standard-setting and inspections) that focus only on remedying the damage done must be complemented by preventive instruments such as environmental impact assessment.176 The preamble of the original text of the EIA Directive clearly gave priority to the harmonization of “disparities between the laws in force in the various Member States with regards to the assessment of the environmental effects of public and private projects” which “may create unfavorable competitive conditions and thereby directly affect the functioning of common market” over necessity “to achieve one of the Community´s objectives in the sphere of the protection of the environment and the quality of life.” The EIA Directive required that the development consent (or in other words license) for public and private projects177 which are likely to have significant impacts on the environment shall be only granted after prior assessment of its “likely significant” environmental impacts. The directive provided two sets of projects in the Annex I and II. The nine categories of projects listed in the Annex I were to be automatically subject to the environmental impact assessment.178 The twelve categories listed in the Annex II were subject to the screening set up on the national level to determine whether the environmental impact assessment will be required or not.179 Pursuant to the Art. 3 of the EIA Directive the environmental impact assessment shall
175. See id. at pt. 2 of the Explanatory Memorandum (outlining the environmental concerns and how they would exacerbate other pressures). 176. See id. at pt. 3 of the Explanatory Memorandum (describing possible solutions for the existing regulatory regime). 177. See EIA Directive art. 1(2)(a) (describing the execution of construction works or of other installations or schemes and other interventions in the natural surroundings and landscape including those involving the extraction of mineral resources). 178. Id. 179 Id. HOW LONG CAN THE WOLF BE TRICKED? 479
“identify, describe and assess in an appropriate manner, in the light of each individual case and in accordance with the Articles 4 to 11, the direct and indirect effects of a project on the following factors: human beings, fauna and flora; soil, water, air, climate and the landscape; the inter-action between the factors mentioned in the first and second indents; material assets and the cultural heritage.”180 The developers were to be required to provide “appropriate information” concerning their project181 and this information was to be supplemented by the additional information from the public authorities and by the comments from the public who may be concerned by the project. The EIA Directive required explicitly that the information provided by the developer, public authorities, and the public “must be taken into consideration in the development consent procedure.”182 Unlike the requirement of preparing the Environmental Impact Statement (EIS) under the U.S. National Environmental Policy Act, the EEC regime was designed more as a process of gathering the information about the project and its impacts on the environment and assessing it in the licensing procedure before the license is issued.183 The EIA Directive allowed the Member States discretion whether to integrate the process of environmental impact assessment into the existing licensing procedures or to introduce a separate EIA procedure.184 As the original EIA Directive was adopted prior to the Single European Act of 1987, it shared some common features with the other “early” environmental directives of the 1960’s and 1970’s. First, the EEC chose a form of a directive which is binding only upon the Member States who are responsible for
180 Id. art 3. 181. See id. art. 5 (describing: (1) a project description specifying the site, design and size of the project; (2) a description of measures to avoid, reduce or remedy significant adverse effects; (3) the date required to identify and assess the project´s impacts; and (4) a non-technical summary of information under 1 to 3.) 182. Id. art. 8. 183. See Louis L. Bono, Implementation of the EC Directive on Environmental Impact Assessments with the English Planning System: A Refinement of the NEPA Process, 9 PACE ENVTL. L. REV. 1, 174, 175 (1999) (distinguishing the two environmental impact assessment regimes). 184. See EIA Directive art 2. pt. 2 (noting the flexibility of the EU’s EIA Directive). 480 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) transposing it into national law rather than a regulation which is directly applicable in all Member States.185 The “early” environmental directives, including the EIA Directive were based mostly on two provisions of the TEEC, namely Art. 100a (now Art. 114 TFEU) on approximation of laws for the purpose of establishment and functioning of the internal market and the flexibility clause of the Art. 235 (now Art. 352 TFEU).186 These two provisions that formed the legal basis of the EEC environmental directives required unanimous approval from all the EEC Member States, so they were always a result of a compromise and set therefore only minimum standards that would “allow the less advanced Member States to catch up and to increase their degree of environmental protection” rather than setting stricter standards for all the Member States.187 The lack of explicit environmental authority also resulted in lax monitoring of the EU law application, poor enforcement and high level of tolerating non-compliance of the Member States by the Commission who is responsible for initiating the enforcement measures such as the infringement procedure.188 There were in particular two reasons for these problems in the area of environmental impact assessment, namely in the way the EIA Directive was drafted189 - too broad and general language, especially the categories of projects subjected to the environmental impact assessment requirement190 – and the fact that the EEC lacked specific authority to adopt and therefore enforce the environmental law. As Ludwig Krämer commented, “[t]he result of this lax monitoring of the application of Community environmental law was that the Member States took considerable liberty in
185. See TFEU, supra 158, art. 288 (discussing the mandate of the TFEU). 186. See id. at art. 352 (“If action by the EU should prove necessary, within the Framework of the policies defined in the Treaties, to attain one of the objectives set out in the Treaties, and the Treaties have not provided the necessary powers, the Council, acting unanimously on a proposal from the Commission and after obtaining the consent of the European Parliament, shall adopt appropriate measures.”). 187. Ludwig Kramer, Differentiation of EU Environmental Policy, 9 EUR. ENVTL. L. REV. 133, 133 (2000). 188. See id. at 135 (outlining that the infringement procedure is regulated in the Art. 258 and 260 of the TFEU). 189. Richard C. Visek, Implementation and Enforcement of EC Environmental Law, 7 GEO. INT’L ENVTL. L. REV. 377, 396 (1995) 190. Malcolm Grant, Implementation of the EC Directive on Environmental Impact Assessment, 4 CONN. J. INT´L L. 463, 465 (1989). HOW LONG CAN THE WOLF BE TRICKED? 481 applying or not applying the directives. In part, they considered directives rather as recommendations than as legally binding instruments . . . the price for EC-wide environmental provisions was thus a loose drafting of texts, a considerable number of legal or factual variations according to specific situations in Member States, and the absence of any serious monitoring of the application of the provisions which had been adopted.”191 The initial EIA Directive of 1985 was amended three times (1997, 2003, and 2009), then codified (2011) and amended again (2014). The amendments and dates when they were adopted and entered into force are summarized in the following table.
Year Directive Adopted Entered Implemented on: into force: by the MSs by: 1985 Directive 85/337/EEC 27 June 5 July 1985 3 July 1988 1985 1997 1st amendment: Directive 3 March 3 April 1997 14 March 1999 97/11/EC 1997 2003 2nd amendment: Directive 26 May 25 June 25 June 2005 2003/35/EC 2003 2003 2009 3rd amendment: Directive 23 April 25 June 25 June 2011 2009/31/EC 2009 2009 2011 Codification of the 13 17 February No changes in Directive 85/337/EEC → December 2012 the text, Directive 2011/92/EU 2011 therefore no need to implement on national level. 2014 1st amendment of the 16 April 15 May 2014 16 May 2017 codified EIA Directive: 2014 Directive 2014/52/EU
The 1997 amendment was intended to bring the EIA Directive in line with several other directives192 and with the UNECE Convention on Environmental Impact Assessment in a Transboundary Context (Espoo Convention) which the EC signed in 1991 and ratified in 1997. The 1997 amendment significantly expanded the list of projects subject to environmental impact assessment and clarified methods of screening or determining the projects that shall be subject to the assessment.
191. Kramer, supra note 187, at 136. 192. Specifically, the Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora and the Council Directive 96/61/EC of 24 September 1996 concerning integrated pollution prevention and control were significant. 482 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
The 2003 amendment was a reaction to the ratification of the UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters (“Aarhus Convention”) by the EC. The 2003 amendment refined the rules on public participation in decision-making regarding the project subject to environmental impact assessment and added the provision on access to justice in terms of a right to initiate a review procedure before a court or another independent and impartial institution established by law to challenge the substantive or procedural legality of decisions, acts or omissions associated with the project in question. The 2009 amendment was based on the Directive 2009/31/EC on the geological storage of carbon dioxide, which only expanded the lists of projects subject to environmental impact assessment or screening by clarifying the existing categories and adding new, e.g. CO2 storage sites. Already the original version of the EIA Directive required: (1) the Member States to inform the Commission of the implementing measures regarding national selection criteria for projects subject to impact assessment; (2) the Commission and the Member States to exchange the experience with applying the EIA Directive; and (3) the Commission to prepare a report on the application of the EIA Directive in five years after its official publication.193 Based on continuous exchange of information with the Member States and public consultations with other stakeholders, the Commission is responsible for proposing changes of the EIA Directive. The last change proposed by the Commission took place in 2014. The 2014 amendment intended to simplify the rules for environmental impact assessment in the EU region and reduce unnecessary administrative burdens while keeping high level of environmental protection. It brings more attention to new challenges and threats (e.g. resource efficiency, climate change, protection of biodiversity etc.) that were not appropriately addressed in the previous version of the EIA Directive. It tries to address the major shortcomings of the EIA Directive that create incentives for problematic implementation on national level, e.g. the screening process which was criticized for leaving too much discretion for the Member State, overlapping assessment requirements under
193. See the Art. 11 of the EIA Directive. HOW LONG CAN THE WOLF BE TRICKED? 483 other EU directives,194 insufficient quality of the EIA process and the EIA report resulting thereof, lack of specific time frames creating uncertainty for businesses and other stakeholders participating in the EIA process or no obligation for assessing project alternatives. Although the last amendment of the EIA Directive clarifies and refines several problematic parts of the EIA Directive, it is still being criticized for too much detail and for creating unnecessary administrative burdens rather than streamlining and lightening the EIA process. The EU Member States will have to implement the 2014 amendment by May 2017. The new “tightened” rules will sooner or later lead to new infringement procedures against the Member States who will not be able to transpose the amended EIA Directive into their national law properly. The insufficient or incorrect implementation of the EIA Directive by the EU Member States constitutes the major problem and a cause for lower effectiveness of the EU environmental impact assessment. Despite the fact that the EIA Directive is in force over 25 years and that there is numerous case law of the European Court of Justice interpreting the EIA Directive, the official statistics from 2007 to 2014 show that the infringements in the area of environmental impact assessment make up around 10% of all newly opened environmental infringements each year.195
Year Total number Waste Water Impact Air Nature Other of open env. assessment infringements 2014 334 102 67 33 51 63 18 2013 353 112 80 29 44 64 24 2012 296 56 79 34 37 69 21 2011 339 76 80 43 35 76 29 2010 445 65 136 42 56 89 57 2009 451 86 90 50 72 92 61 2008 481 111 95 50 65 105 55 2007 479 93 74 57 83 121 51
194. Other impact assessment regimes are created under the Habitats Directive 92/43/EC, Directive 2001/42/EC on strategic environmental assessment or under the Directive 2010/75/EU on industrial emissions. 195. See Legal Enforcement, European Commission, http://ec.europa.eu/environment/legal/law/statistics.htm (last updated Mar. 25, 2015); see also Legal Enforcement: Statistics on environmental infringements, http://ec.europa.eu/environment/legal/law/pdf/statistics_sector.pdf. 484 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
The most significant and recurring problem consists in failures as to the screening process in which the Member States exercise a wide discretion to determine on a case-by- case basis and based on national thresholds or criteria whether an EIA is required for projects listed in the Annex II of the EIA Directive.196 In too many cases, the Member States either let the projects with significant environmental impacts escape the assessment requirement (death by a thousand cuts approach), or projects with no significant impact are subjected to the impact assessment, unreasonably increasing not only the administrative burden, but also the project’s cost. The official figures presented by the Commission in 2012197 show that the average number of environmental impact assessments conducted each year in the EU is between 15,000 and 26,000. Each year the average number of screenings ranges between 27,400 and 33,800 projects. The EU average duration of the EIA process is 11.6 months and the average costs borne by the developer due to environmental impact assessments are estimated to be € 41,000.198 The main concerns presented by businesses are additional costs due to project delays and to legal disputes arising from the improper application of the EIA law. The implementation of the EU environmental law is ensured by the Member States and currently presents the biggest challenge to EU environmental law.199 Of course the implementation is difficult—environmental protection in the EU is already subject to extensive EU legislation, with the
196. See Report from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on the application and effectiveness of the EIA Directive (Directive 85/337/EEC, as amended by Directives 97/11/EC and 2003/35/EC). COM(2009) 378 final, p. 5. 197. See Commission Staff Working Document. Executive Summary of the Impact Assessment accompanying the document Proposal for a Directive of the European Parliament and of the Council amending Directive 2011/92/EU on the assessment of the effects of certain public and private projects on the environment. COM(2012) 628 final, p. 1. 198. Id. 199. See Markéta Whelanová, Presentation at Brussels: Implementation of EU Law in the Czech Legal Order – Methods and Problems, Jan. 30, 2009, lecture slides available at http://ec.europa.eu/dgs/legal_service/seminars/cz_whelanova_slides_en.pdf (explaining the challenges of implementing EU law and proposed methods for effectively doing so) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). HOW LONG CAN THE WOLF BE TRICKED? 485 exception of soil protection.200 Much of this legislation is long established.201 Thus, the main challenge is timely and proper implementation on the national level.202 As one the recent Commission report states:
Implementation has a cost. But the cost of non- compliance is very often much higher . . . The costs of not implementing current legislation are broadly estimated at around €50 billion a year. These relate not just to environmental but also to human health impacts. For example, 20% to 50% of the European population lives in areas where air quality breaches European limit values and the estimated annual costs in terms of health expenditure or days of work lost run to billions of Euros.203
The following chapter will describe the evolution of the Czech law on environmental impact assessment that was enacted in early 1990s to properly implement the EIA Directive. The following chapter will further analyze the difficulties with proper and timely implementation that led the Commission to initiate two infringement procedures for non-compliance of the Czech law with the EU law.
200. See EUROPEAN COMMISSION, Soil, EUROPEAN COMMISSION: ENVIRONMENT, Mar. 18, 2015, http://ec.europa.eu/environment/soil/index_en.htm (“Soil is not subject to a comprehensive and coherent set of rules in the Union.”). 201. See EUROPEAN COMMISSION, Legal Enforcement, EUROPEAN COMMISSION: ENVIRONMENT, Mar. 30, 2015, http://ec.europa.eu/environment/legal/law/index.htm (providing an overview of the complex and wide-reaching legislative measures regulating environmental law) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 202. See EUROPEAN COMMISSION, Implementation, EUROPEAN COMMISSION: ENVIRONMENT, Mar. 25, 2015, http://ec.europa.eu/environment/legal/implementation_en.htm (outlining the necessity for proper and timely implementation) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 203. Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Improving the Delivery of Benefits from EU Environmental Measures: Building Confidence Through Better Knowledge and Responsiveness, at 2, 3, 11 COM (2012) 095 final (July 3, 2012). 486 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
IV. Czech EIA Law
The Czech Republic adopted the EIA legislation in the early 1990s. In 1992, the first environmental impact assessment Act was adopted, Act. No. 244/1992 Coll.204 This Act regulated both EIA and later also the SEA procedure. In 2001, a new act, Act No. 100/2001 Coll., was adopted in order to fulfill all the requirements set by the EIA Directive.205 Initially, that act regulated only the EIA procedure while Act No. 244/1992 Coll. contained the legal regulation of the SEA procedure. In May of 2004, the SEA procedure was integrated into Act No. 100/2001 Coll., which now regulates both EIA and SEA procedures.206 Act no. 244/1992 Coll. was abolished.207
A. EIA Act of 1992
After the implementation of the first Czechoslovakian democratic government in 1989, environmental protection became a top priority.208 Before the 1992 elections209 and the
204. See IMPLEMENTING STRATEGIC ENVIRONMENTAL ASSESSMENT, 193–96 (Michael Schmidt, et al., eds., 2006) (providing an overview of the evolution of Czech EIA and SEA law). 205. See EU Forum of Judges for the Environment Conference 2011, Warsaw Oct. 14–15, 2011, Annual Country Report: Czech Republic, 1 available at http://www.eufje.org/images/docConf/war2011/CZ%20war2011.pdf (explaining the implementation of the SEA directive in the Czech Republic) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 206. See BARRY DALAL-CLAYTON AND BARRY SADLER, STRATEGIC ENVIRONMENTAL ASSESSMENT: A SOURCEBOOK REFERENCE GUIDE TO INTERNATIONAL EXPERIENCE 194 (2005) (“In 2004, Czech EIA legislation was consolidated and amended as part of the transposition of the SEA Directive.”). 207. See Convention on Biological Diversity, Sectoral Integration of Biodiversity in Czech Republic, RESOURCE MOBILIZATION INFORMATION DIGEST, 4 (Feb. 2013) (explaining that the 2004 act “regulated the assessment of environmental impacts of concepts and abolished the valid Czech National Council Act No. 244/1992 Coll.”). 208. See Marián Čalfa, Program Declaration of the Czechoslovakian Federal Government at 5, Jun. 27, 1990–July 2, 1992, http://www.vlada.cz/assets/clenove-vlady/historie-minulych-vlad/prehled- vlad-cr/1990-1992-csfr/marian-calfa-2/ppv-1990-1992-calfa2.pdf (available in Czech only) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 209. See INTER-PARLIAMENTARY UNION, Czechoslovakia: Elections Held in 1992, PARLINE: CZECH REPUBLIC – SENATE 1992, http://www.ipu.org/parline-e/reports/arc/2084_92.htm (explaining that in June 1992, elections to the Czech and Slovak National Councils took place)
HOW LONG CAN THE WOLF BE TRICKED? 487
1993 split of Czechoslovakia, many important environmental laws were passed based on examples and inspiration from abroad and with substantial help of foreign experts.210 For example, the Czech Act on Environment211 was modeled after the U.S. National Environmental Policy Act (NEPA) as an “environmental policy act” and was intended to serve as an “umbrella” environmental law that would define key terms and set basic principles and rules that shall be reflected in all implementing laws.212 The federal government planned to introduce the umbrella Act on Environment to the Federal Assembly for approval at the end of 1990.213 However, the government did not meet any of the deadlines set by the Federal Assembly.214 Moreover, the governmental bill was being revised and supplemented by so many details that it eventually drowned in the disputes over jurisdictions between the Czech and
(on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 210. See Explanatory Memorandum, Bill No. 921 presented by a group of deputies. In Czech: Důvodová zpráva k návrhu poslanců Ondřeje Humla, Miloslava Soldáta, Vladimíra Savčinského a Petra Gandaloviče na vydání Zákona o životním prostředí. 211. Act No. 17/1992 Coll.,. In Czech: Zákon č. 17/1992 Sb., o životním prostředí. 212. See Joint Meeting of the House of the People and House of the Nations of the Federal Assembly of the Czech and Slovak Federal Republic, 19th Joint Meeting Report, http://www.psp.cz/eknih/1990fs/slsn/stenprot/019schuz/s019005.htm (available in Czech only). In Czech: Federální shromáždění České a Slovenské Federativní Republiky. Zpráva o 19. společné schůzi Sněmovny lidu a Směnovny národů. 1. den – úterý 3. 12. 1991, bod programu 3: Návrh zákona o životním prostředí (tisk 921) a návrh usnesení SL a SN (tisk 1062). 213. See Country Factsheet on National SCP Policies: the Czech Republic, EUROPEAN TOPIC CENTRE ON SUSTAINABLE CONSUMPTION AND PRODUCTION 4 (Jan. 11, 2010) available at http://scp.eionet.europa.eu/facts/factsheets_waste/fs_scp/pdf/CZ1 (explaining that the changes to environmental policy in the early 1990s were intended “to establish a comprehensive, transparent and consistent system of environmental legislation) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 214. See REGIONAL ENVIRONMENTAL CENTER FOR CENTRAL AND EASTERN EUROPE, Czech Republic: Political, Economic and Social Impacts on Environmental Protection at the Spring of 1994, STRATEGIC ENVIRONMENTAL ISSUES IN CENTRAL AND EASTERN EUROPE (Aug. 1994) (Vol. 2), http://archive.rec.org/REC/Publications/StratIssues/FeeBased/Czech.html (explaining that the deadlines for implementation were short) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 488 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Slovak Republics.215 In May 1991, a group of deputies presented their bill. It was quietly held up until December 1991 when it became clear that the federal government would not present the governmental bill. The version of the bill presented by the deputies in December 1991 was based on a biocentric approach to environment; it introduced the concept of sustainable development, defined the key terms and principles of environmental protection, and set the obligations of natural and legal persons, including the liability for environmental harm.216 Despite the fact that the Act on Environment was broadly supported, it became the subject of heated debates over whether it should include provisions on the environmental impact assessment.217 One part of the political spectrum supported the idea of a brief, simple, and general umbrella law on environment, along with a separate act concerning environmental impact assessment. The other part of the political spectrum felt the need to introduce the basics of the environmental impact assessment already in the Act on Environment to make sure that at least some rules will be in place before more detailed legislation is passed. The main concern was that if the rules on environmental impact assessment were not passed quickly, Czechoslovakia would be flooded by outdated technologies that are not permitted in other countries due to strict EIA rules. The proponents of including the EIA provision in the Acton Environment also stressed the importance of prompt transposition of the EU law on environmental impact assessment (the EIA Directive) and of the United Nations Economic Commission for Europe Convention on Environmental Impact Assessment in a Transboundary Context.218 During debate in Federal Assembly concerning the
215. See id. (stating that the short deadlines for environmental compliance can prompt poorly thought-out policies to be adopted). 216. See Ladislav Miko, et al., Environmental Enforcement in the Czech Republic: The EU Pre-Accession Phase, Report from FIFTH INTERNATIONAL CONFERENCE ON ENVIRONMENTAL COMPLIANCE AND ENFORCEMENT 117, 119–120 (Nov. 16–20, 1998) available at http://www.inece.org/5thvol2/cizkova.pdf (detailing the main problems in environmental enforcement) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 217. See id. at 118 (outlining the tensions involved with adopting environmental legislation). 218. See Introduction to Espoo Convention, UNITED NATIONS ECONOMIC COMMISSION FOR EUROPE (last visited Apr. 4, 2015), http://www.unece.org/env/eia/eia.html (explaining that the Espoo (EIA)
HOW LONG CAN THE WOLF BE TRICKED? 489 proposed Act on Environment, Zdeněk Masopust, deputy of the Federal Assembly from 1990 to 1992 stressed: “We shall regard this act not only as a way of dealing with our past, what I personally hold for necessary, but above all as an act of our, hopefully already European future . . . .”219 The Act on Environment was passed on December 5, 1991, and published in the Collection of Laws of the Czech and Slovak Federal Republic in January 1992 under the number 17/1992.220 According to the explanatory memorandum associated with this law, the Act on Environment set a new philosophy and built a framework for a construction of modern environmental law.221 As a reaction to concerns expressed during the debates in the Federal Assembly, the Act on Environment was approved with the provisions on domestic and transboundary environmental impact assessment and with a list of projects subject to the EIA requirement. Because the Act on Environment was a federal law, it anticipated that both national councils would pass the implementing laws. The Czech National Council adopted the implementing law shortly after the Federal Assembly adopted the Act on Environment. It was presented as a governmental bill, which was debated in the Czech National Council and approved on April 2, 1992; it was promulgated in the Collection of Laws on April 15, 1992, and entered into force on July 1, 1992.222 In scope, the Czech Act on the EIA was even more progressive than the EIA Directive. In the Article 1, par. 1, it declared the constructions and changes thereof, and that other activities and technologies listed in Annex I are subject to the
Convention “sets out the obligations of Parties to assess the environmental impact” of state activities at an early stage of the activity planning) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 219. Joint Meeting, supra note 213. 220. See ED BELLINGER, ENVIRONMENTAL ASSESSMENT IN COUNTRIES IN TRANSITION, 45–46 (2000) (highlighting the key provisions of Act No. 17/1992). 221. See “Preamble” Act No. 100/2001, Coll. This Act is still in force and clearly expresses this new philosophy. The laws enacted during the enthusiastic early 1990s, including the Act on Environment or the Act against Animal Torture contain the preambles. These preambles are not binding part of the law, but express the values and philosophy underlying a particular piece of legislation. Since 1993, none of the Czech laws contain a preamble. 222. Act No. 244/1992 Sb., on environmental impact assessment (in Czech: Zákon č. 244/1992 Sb., o posuzování vlivů na životní prostředí). 490 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) environmental impact assessment and development plans, programs, and products. The explanatory memorandum accompanying the Czech Act on environmental impact assessment emphasized that the Act introduces the environmental impact assessment as an effective instrument of prevention successfully applied in developed countries since 1969.223 It also concluded that the existing Czechoslovakian legislation regarding construction activities or environmental protection did not explicitly require the environmental impact assessment. The adoption of the Act on environmental impact assessment was presented as a necessary step before Czechoslovakia could become a party to the Espoo Convention and a requirement for foreign financial support of environmental projects that was absolutely indispensable due to the economic crisis that hit Czechoslovakia in the early years of transition to market economy. The explanatory memorandum also mentions that the Czech environmental impact assessment law was inspired explicitly by the Austrian and Dutch laws with special regard to the Council Directive 85/337/EEC on environmental impact assessment (EIA Directive).224 Looking back at the first Czech law on environmental impact assessment from 1992, it is not hard to notice that the basics of the procedural design remained the same. The Act on environmental impact assessment contained a list of projects subject to the EIA requirement. The list was divided into two Annexes (1 and 2) based on the competent authority.225 Everyone who intended to construct a building, conduct an activity, or use a technology listed in Annex 1 or 2 of the Act on environmental impact assessment had to submit a notification and EIA documentation to the competent authority, which separate from the licensing authority.226 The EIA documentation was to be reviewed by an independent
223. See Explanatory Memorandum Accompanying the Governmental Proposal of the Act on Environmental Impact Assessment, http://www.psp.cz/eknih/1990cnr/tisky/t0658_03.htm (available in Czech only) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 224. Council Directive 85/337, 1985 (EC). 225. See Annex 1–2, Act No. 17/1992, Coll. (explaining that, for projects listed in the Annex 1, the competent authority was the Ministry of Environment, and for projects listed in the Annex 2 the competent authority was the district office). 226. See Annex 1–2, Act No. 17/1992, Coll. (laying out the process for complying with the Act). HOW LONG CAN THE WOLF BE TRICKED? 491 expert chosen by the competent authority. After receiving the review report, the competent authority had to hold a public hearing and, afterwards, issue an environmental impact statement (EIS). The authority responsible for licensing the project subject to EIA could not grant the license without considering the EIS. The Act on environmental impact assessment allowed the public to inspect the EIA documentation submitted by the developer and to submit written comments on such documentation. 227 The members of public could also attend a public hearing on the issue.228 The Act on environmental impact assessment specifically mentioned a citizens’ initiative and a civic association as formalized groups of the public who could also submit their written comments regarding the EIA documentation.229 Based on their participation in the EIA process, the civic association had a standing in the subsequent licensing process.230
B. EIA Act of 2001
Since 1998, the Czech government started to prepare a new EIA Act that would reflect major changes of the EIA Directive as a result of its amendment in 1997.231 The original version of the governmental bill from January 2000 was presented to the Parliament in spring 2000. It intended to transpose the amended EIA Directive and also included provisions on strategic impact assessment of plans and programs because, at that time, the EU was preparing the SEA Directive. However in the legislative process conducted by two houses of the Czech Parliament the original governmental bill was changed significantly. 232 The final version that was passed by the Parliament on February 20,
227. Act No. 17/1992, Coll., Art. 7, Par. 3. 228. Act No. 17/1992, Coll., Art. 10. 229. See Act No. 17/1992, Coll., Art. 8, Par. 1. (stating, at minimum, 500 members of public older than 18 years could form a citizens’ initiative). The citizens’ initiative was represented by a proxy who could submit comments on the EIA documentation and attend the public hearing on behalf of the citizens’ initiative. 230. Act. No. 17/1992, Coll., Art. 8, Par. 5. 231. See Dvořák, Libor, Posuzování vlivů koncepcí na životní prostředí. In České právo životního prostředí Vol. 27, No. 1/2010, p. 29. 232. The two houses of the Czech Parliament are: the House of Deputies and the Senate. 492 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
2001, and promulgated in March 2001 only conserved the outdated features of the previous EIA Act of 1992. The new EIA Act basically copied the regime that only allowed public participation at the end of the EIA procedure and had short deadlines and other obstacles that rendered the public’s participation ineffective and enhanced the risk of subsequent litigation.233 It was also criticized for being incompatible with the EIA Directive and with the Aarhus Convention which the Czech Republic already signed in 1998.234 The provisions on strategic impact assessment were left out with the reasoning that the SEA Directive had not yet been adopted, despite the fact that the final text of the SEA Directive was already known. The SEA Directive was adopted on June 27, 2001, three months later than the Czech EIA Act of 2001, and entered into force on July 21, 2001. Instead of being ahead with the implementation of the EU law, the Czech politicians decided to conserve the outdated, very brief version of the strategic impact assessment contained in the EIA Act of 1992235 and be forced to transpose the SEA Directive by the latest possible date, which was May 1, 2004, when the Czech Republic officially joined the EU. In 2004, the Act of 1992 was abolished. Since then, the EIA Act of 2001 has regulated both the EIA and SEA. As indicated above, the whole design of the EIA procedure and its relation to licensing procedures was copied from the EIA Act of 1992 without ever trying to come up with a more integrated version of decision-making that would be more cost-efficient and less time-consuming for all the stakeholders and public authorities. The EIA Directive does not specifically dictate how the EIA fits into the national system of licensing projects; it gives the Member States a choice. According to the Art. 2, par. 2 and 2a of the EIA Directive, the environmental impact assessment may be integrated into the existing licensing
233. See, e.g., Společnost pro trvale udržitelný rozvoj. Stanovisko č. 91 k projednávání zákona EIA. Available in Czech only at http://www.stuz.cz/Zpravodaje/Zpravodaj011/75.htm. 234. UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus, 1998). 235. After the project impact assessment was moved to the new EIA Act of 2001 only curtailed version of the EIA Act of 1992 remained in force (in particular only Art. 1, 14, 23 and 24). See Dvořák, Libor. Posuzování vlivů koncepcí na životní prostředí. In České právo životního prostředí Vol. 27, No. 1/2010, p. 30. HOW LONG CAN THE WOLF BE TRICKED? 493 procedures or may be designed as a separate procedure which shall then be carried out before the license is granted. Since the first EIA Act of 1992 the Czech environmental impact assessment is established as a separate procedural step that has to take place before the administrative authorities grant a license for a specific project. The main disease of the Czech licensing system is that it is overly complicated. It has always been designed in a piecemeal fashion by adding more and more administrative steps to be taken before the project might actually be carried out. In this manner, the Czech Republic implemented all the relevant EU environmental directives, including the EIA Directive. According to the EIA Act of 2001, the EIA procedure encompasses six stages: 1. Project notification, which is submitted by the developer to the competent authority with content specified in Annex 3 of the EIA Act and disclosed to the public, who is allowed to comment thereon within set time limit; 2. Screening and/or scoping; 3. EIA documentation with contents specified in Annex 4 of the EIA Act, which is elaborated by an authorized expert paid by the developer, submitted to the competent authority for review, and disclosed to the public, who is allowed to comment thereon within set time limit; 4. Expert review of the EIA Documentation, which is elaborated by an independent expert chosen by the competent authority. The expert review is also disclosed to the public and the public can comment on it within a set time limit; 5. Public hearing, which only takes place if the competent authority receives at least one justified written comment criticizing the EIA documentation; 6. Environmental Impact Statement (EIS), which is elaborated by the competent authority based on the EIA documentation, its expert review, and based on the result of the public hearing, if applicable.236
236. See Veronika Tomoszková, Environmental Impact Assessment in the Czech Republic, in IMPLEMENTATION AND ENFORCEMENT OF EU ENVIRONMENTAL LAW IN THE VISEGRAD COUNTRIES, Palacky University in
494 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Based on the Czech law, the Environmental Impact Statement (EIS) resulting from the EIA procedure does not constitute a separate administrative decision that may be appealed or separately challenged before court. It serves as a mere background material for decision-making of licensing authority. Until the end of March 2015, the EIS was not binding as to the licensing authority, which had to consider the EIS, but could deviate from it. Based on the newest amendment of the EIA Act, the EIS will be binding for decision-making of the licensing authority that will have to respect it. This means if the EIS is negative, stating that there will be too many significant negative impacts on the environment, the licensing authority will not be allowed to grant the license. The scope of the environmental impact assessment is determined by the list of the projects subject to EIS requirement automatically (Category I projects) or subject to the screening that determines whether the EIS for that particular project is required (Category II projects).237 Moreover, an impact assessment is obligatory for changes of the projects listed in Category I if the change, by its own capacity or extent, reaches or exceeds the limits specified in for that specific project in Annex 1. The changes of projects in Category I that do not reach the limits specified in Annex 1 are subject to the screening procedure if their capacity or extent is significantly increased or if the technologies, operations control, or usage changes significantly.238 Projects listed in Category II are subject to screening procedure where the competent authority determines whether the project needs an EIS.239 In reality, there are also many projects that do not reach the limits specified in Annex 1 but might have significant impact on human health or the environment, especially in connection with already existing and operating projects. According to Art. 4 par. 1(d) of the EIA Act of 2001, if the competent authority determines so in pre-screening, then these so-called under-limit projects are
Olomouc 188-94 (2014) (giving more details on the individual stages of the Czech EIA procedure). 237. See 100/2001, Coll., Annex 1 (showing the list of projects of the EIA Act of 2001; it transposes the Annex I and II of the EIA Directive). 238. See Tomoszková, supra note 236, at 185 (2014). 239. See 100/2001 § 4(b) (explaining a fact-finding procedure pursuant to § 7 is used to determine the need for an EIA under Category II). HOW LONG CAN THE WOLF BE TRICKED? 495 subject to screening where it will be determined whether they require the EIS or not.240 The most contested and criticized part of the EIA Act of 2001 is the provisions on public participation. The criticism regarding public participation opportunities in the EIA procedure and in subsequent licensing procedures was not new; it was heard since the mid-1990s, after some initial experience with the EIA Act of 1992 in practice.241 Leading experts on environmental policy and law, including the first federal minister for environment, Josef Vavroušek, complained in 1994 that the poor design of the EIA Act of 1992 and the lack of information on the importance and essence of EIA both contribute to the overall unpreparedness of those who participate in the EIA. As a result, the investors or developers view the EIA as an obstructing formality. Competent authorities lack sufficient skills and knowledge to manage EIA effectively and by proceeding in an overly bureaucratic manner they over- complicate it. Experts elaborating EIA documentation and reviews see the EIA merely as an opportunity for profit.242 Municipalities more often stand up for the interest of the investors and developers than for the local communities, and the local communities remain rather passive.243 The lack of sufficient and comprehensible information on projects contributed to the overall agony of the local communities affected by the investor’s project. Under these circumstances, the environmental non-governmental organizations (NGOs) were the last ones with enough courage to stand up for the
240. See id. at 186. 241. See Branis, Martin, The environmental impact assessment act in the Czech Republic: Origins, introduction, and implementation issues, 14 ENVIRONMENTAL IMPACT ASSESSMENT REVIEW 195 (stating that public participation is limited, even though it is recognized as an important part of the Act). 242. See T.C. Telfer et al., Review of environmental impact assessment and monitoring in aquaculture in Europe and North America, UN FOOD AND AGRICULTURE ORGANIZATION, 285, 367 (2009) available at http://www.fao.org/3/a-i0970e/i0970e01d.pdf (“In addition, even where there is a mechanism for implementation of the EIA procedure, this is over complicated and often too bureaucratic in many countries.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 243. Josef Vavroušek, “Stanovisko č. 22 k proceduře EIA,” SOCIETY FOR SUSTAINABLE LIFE (Společnost pro trvale udržitelný život), Jan. 14, 1994 available at http://www.stuz.cz/index.php?option=com_content&view=article&id=33:stan ovisko-c-22-k-procedure-eia&catid=33&Itemid=33) (available in Czech only). 496 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) environment. No matter how noble the intentions of those who drafted the early Czechoslovakian environmental laws were, the public affected by the projects and the environmental NGOs that stood up for them, have always been treated as an irreconcilable opposition and never as a valuable partner in decision-making. Contrary to the requirements of the Aarhus Convention and the EIA Directive, the Czech EIA Acts never included a definition of the “public concerned,”244 causing lack of uniform practices and restrictive interpretation of the scope of those who are entitled to standing and a right to challenge decisions of competent authorities. Lack of a precise definition also paradoxically led to the situation in which natural persons, as members of the concerned public who would apply for standing in subsequent licensing procedures, were left out with no standing right.245 According to the EIA Act of 2001, public participation during the EIA procedure takes place in form of submitting comments. Anyone is allowed to submit his or her comment to the project notification, and to the EIA documentation and its expert review, if the two latter stages take place. As the EIA procedure is separate from the licensing procedure, the public participation requirements of the EIA Directive and the Aarhus Convention shall stretch out to the licensing taking place after the environmental impact assessment.246 The EIA Act of 2001 anticipates public participation in subsequent licensing procedure with the ability to grant NGOs and affected municipalities standing in such
244. See UNECE Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, Aarhus, Art. 2, Par. 5 (stating that the “public concerned” means “the public affected or likely to be affected by, or having an interest in, the environmental decision-making; for the purpose of this definition, non- governmental organizations promoting environmental protection and meeting any requirements under national law shall be deemed to have an interest”). 245. See Michal Sobotka and Petra Humlíčková, Rozšíření účasti veřejnosti (?) aneb několik poznámek k jedné zbytečné novele zákona a posuzování vlivů na životní prostředí, ČESKÉ PRÁVO ŽIVOTNÍHO PROSTŘEDÍ, 96, 2010 (Vol. 27, No. 1/2010); see also Z Adameová, Účast veřejnosti v procesu EIA – případ České republiky, ČESKÉ PRÁVO ŽIVOTNÍHO PROSTŘEDÍ 9, 2011 (Vol. 30, No. 2). 246. See Ekologický právní servis. Analýza transpozice a implementace Směrnic ES o posuzování vlivů na životní prostředí (2006) available at http://frankbold.org/sites/default/files/publikace/smernice_eia_v_cr_1.pdf (available in Czech only). HOW LONG CAN THE WOLF BE TRICKED? 497 proceedings and, since 2009, the opportunity to access the courts.247 Based on Art. 23 pt. 9 of the Act on EIA/SEA, a local office of two types of NGOs,248 must focus on protection of public interests pursuant to the special laws,249 or municipality affected by the investor’s project have standing in subsequent licensing procedure if the following conditions are cumulatively met:
1. The NGO has submitted a written comment regarding the project notification, EIA documentation or its expert review within the set time limits, 2. the competent authority stated in the EIS that the opinion of that particular NGO is fully or at least partially included therein, and 3. the licensing authority has not decided that the interests protected by the NGO in question are not affected in the permitting procedure.250
The requirement of previous activity in the EIA procedure complies with the EIA Directive. The other two requirements, however, are too restrictive and leave too much discretion to public authorities in determining who is granted standing in licensing procedure. Since the accession of the Czech Republic to the EU, the Commission has criticized the Czech law and practice of public authorities regarding public participation. In 2006 it launched the first infringement proceeding against Czech Republic for failure to comply with the requirements of the EIA Directive, namely of then Art. 10a.251
247. See Act No. 100/2001 Coll. § 9–10, available at http://faolex.fao.org/docs/html/cze74060.htm (describing opportunities for review of decisions and setting timelines for opinions and decisions). 248. See id. at § 23 (describing when a civic association may become part of an action). The EIA Act specifically mentions a civic association (občanské sdružení) and a generally beneficial society (obecně prospěšná společnost) as subjects entitled to standing in subsequent licensing process. 249. See Act No. 114/1992 Coll. (dealing with Nature and Landscape Protection); see also Act No. 20/1987 Coll. (discussing State Cultural Monuments Care). 250. Veronika Tomoszková, Environmental Impact Assessment in the Czech Republic, in VERONIKA TOMOSZKOVÁ ET AL., IMPLEMENTATION AND ENFORCEMENT OF EU ENVIRONMENTAL LAW IN THE VISEGRAD COUNTRIES, 197 (2014). 251. See Part IV(C) infra (describing the infringement proceedings brought against the Czech Republic in response to failure to implement the EIA directive). 498 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
B. Czech EIA Act Under Fire? (C-378/09, ACCC/2010/50 and infringement no. 2013/2048)
Article 10a of the original version of the EIA Directive252 requires that the relevant law in the Member States ensures that the:
members of the public concerned (a) having a sufficient interest, or alternatively, (b) maintaining the impairment of a right, where administrative procedural law of a Member State requires this as a precondition, have access to a review procedure before a court of law or another independent and impartial body established by law to challenge the substantive or procedural legality of decisions, acts or omissions subject to the public participation provisions of the EIA Directive.253
The EIA Directive explicitly states that a sufficient interest and impairment of right shall be defined by the Member States consistently with the objective of giving the public concerned wide access to justice.254 NGOs meeting the national requirements shall be automatically deemed to have a sufficient interest and rights capable of being impaired.255 The EIA Directive also requires that the review procedure shall be “fair, equitable, timely and not prohibitively expensive.”256 On July 3, 2006 the Commission sent its letter of formal notice concerning an alleged infringement of the Art. 10a par. 1-3 of the EIA Directive and gave the Czech Republic
252. The former Art. 10a of the EIA Directive before its codification in 2011 is now Art. 11 of the codified EIA Directive (Directive no. 2011/92/EU). The wording of the former Art. 10a and of the current Art. 11 are the same. 253. Council Directive 2011/92, art. 11, ¶3. 254. See id. (describing the rights of the member states in relation to implementing the directive). 255. See id. (explain the standing of NGOs within the directive and their rights according to it). 256. See id. ¶ 4 (including the possibility of administrative review and maintaining exhaustion requirements before judicial review procedures). HOW LONG CAN THE WOLF BE TRICKED? 499 two months to respond.257 The Czech Republic responded to the Commission’s letter of formal notice by admitting its failure and promised to amend the EIA Act.258 However the amendment was not passed, so on June 29, 2007 the Commission moved to the next stage of the infringement procedure and issued the reasoned opinion. The first bill proposing amendment of the EIA Act was presented to the Czech Parliament in September 2008, but it was declined in the third reading in spring 2009. The Czech Republic informed the Commission and tried to explain why the amendment of the EIA Act was not passed. In its letter from March 10, 2009 the Czech Republic reassured the Commission that new bill will be presented to the Parliament and hopefully passed soon.259 However then on March 24, 2009 the Czech Parliament voted down the government and political crisis froze all attempts to deal with the infringement. After the last letter from the Czech Republic sent in March 2009 the Commission did not receive any update, so on September 23, 2009 it filed an action for failure of the Czech Republic to fulfil its obligations as an EU Member State to the European Court of Justice. In the Czech Republic, parliamentary elections were about to be held in October 2009. Under time pressure of the upcoming elections, the third bill proposing the amendment of the EIA Act was presented to the House of Deputies. During its last meeting before the elections, the Czech Parliament finally approved the bill. Unexpectedly, the President of the Czech Republic (Václav Klaus at that time), who signs all the bills that are passed by the Parliament, vetoed the bill amending the EIA Act, despite having knowledge of the action filed against the Czech Republic. The House of Deputies
257. See Press Release, European Comm’n, Environmental Impact Assessment: Comm’n Takes Legal Action to Improve Implementation in 10 Member States (July 3, 2006) (describing the reason for the letter to the Czech Republic as improper rules restricting the public’s right to go to court to assert right to participate in EIA procedures). 258. See Czech Republic: New EIA legislation may slow down the building-permit procedure, SCHOENHERR, available at http://www.schoenherr.eu/knowledge/knowledge-detail/czech-republic-new- eia-legislation-may-slow-down-the-building-permit-procedure/ (stating the Czech Republic’s response) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 259. See Stejskal, Vojtěch. Rozsudek Soudního dvora EU proti České Republice ve věci EIA. In České právo životního prostředí. Vol. 27, No. 1/2010, p. 124. 500 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) overturned the President’s veto by 117 votes.260 So the bill amending the EIA Act was finally passed and on December 11, 2009 promulgated under no. 436/2009 Coll.261 Based on the established case law, the European Court of Justice (ECJ) cannot regard any changes subsequent to time period laid down in the Commission’s reasoned opinion.262 Therefore, after the action was filed with the ECJ, the adoption of the EIA Act amendment was inconsequential and the ECJ had to rule against the Czech Republic. In its judgment from June 10, 2010 the ECJ ruled:
by failing to adopt within the time-limit prescribed the laws, regulations and administrative provisions necessary to comply with the Art. 10a par. 1-3 of the Council Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment, as amended by Directive 2003/35/EC of the European Parliament and of the Council of 26 May 2003, the Czech Republic has failed to fulfill its obligations under that directive263
and therefore ordered the Czech Republic to pay the costs.264 In the meantime the EIA Act amendment aiming to set aside the shortcomings of public participation and access to
260. Overturning the President’s veto according to the Czech Constitution requires an absolute majority of votes by 200 Deputies, i.e. at least 101 votes. See Art. 50 pt. 2 of the Constitution of the Czech Republic. 261. See Overview of Legislative Changes in November and December 2009, NWD LEGAL, 3–4, available at http://www.nwd- legal.com/data/documents/_135.pdf (giving an overview of 436/2009) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 262. See, e.g., Case C-111/00 Commission v. Austria, 2001 I- 07555 (“[T]he question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation in the Member State as it stood at the end of the period laid down in the reasoned opinion, . . . the Court may not take account of any subsequent changes.”); see also Case C-23/05 Commission v. Luxemboug, 2005 I-9535 (stating it is settled law that the Court must consider the Member State’s situation as it was at the end of the period and may not consider changes made after that time). 263. Case C-378/09, Comm’n v. the Czech Republic, 2010 E.C.R. I-00078. 264. See id. (providing a resolution for the Czech Republic’s infringement). HOW LONG CAN THE WOLF BE TRICKED? 501 justice regarding the EIA and subsequent licensing procedures entered into force.265 From the moment the amendment was passed the experts on environmental and administrative law criticized the language of the law. Experts believed it would not set aside any of the deficiencies that led to the condemning judgment by the ECJ. Experts predicted that the Commission would go after the Czech Republic again.266 As predicted267 the Commission initiated a “second round” of infringement procedure according to the Art. 260 TFEU.268 In November 2012 the “second round” proceedings were stopped due to the Commission’s plans to initiate new, “broader” infringement procedure against the Czech Republic regarding the incorrect transposition of the EIA Directive. The “second round” infringement proceedings are limited by the scope of the action brought by Commission in the “first round”. If the Commission continued it could only contest the non-
265. See Ceske Noviny, Czech Republic: EIA Law Now Complies with the EU, ESMERCK, (Jan. 23, 2012) (describing the changes made to the EIA law and the new provisions for access to justice, while also commenting on he hopes that the new law would end the four year struggle with the European Commission). 266. See Press Release, European Comm’n, Env’t: Commission Asks Czech Republic to Comply with Ruling on Environmental Impact Assessments (Nov. 24, 2010) (expressing doubts as to the actual implementation of the directive despite the ruling of the European Court of Justice). 267. See Sobotka, Michal; Humlíčková, Petra. Rozšíření účasti veřejnosti (?) aneb několik poznámek k jedné zbytečné novele zákona a posuzování vlivů na životní prostředí. In České právo životního prostředí. Vol. 27, No. 1/2010. p. 94-98. Stejskal, V. Rozsudek Soudního dvora EU proti České Republic eve věci EIA. In České právo životního prostředí,.Vol. 27, No. 1/2010, 125 available at http://www.cspzp.com/dokumenty/casopis/cislo_30.pdf. 268. See Martin Hedemann-Robinson, ENFORCEMENT OF EUROPEAN ENVIRONMENTAL LAW. LEGAL ISSUES AND CHALLENGES, ROUTLEDGE-CAVENDISH 27-205 (2007); Pål Wennerås, THE ENFORCEMENT OF EC ENVIRONMENTAL LAW 251–308 (Oxford University Press, 2007); Jan H. Jans & Hans H. B. Vedder, EUROPEAN ENVIRONMENTAL LAW: AFTER LISBON, 170–78 (4th ed., Europa Law Publishing, 2012); Ludwig Krämer, EU ENVIRONMENTAL LAW 406–10 (7th ed., Sweet & Maxwell, 2012). The infringement proceedings can take place in two litigation rounds. The first round laid down in the Art. 258 TFEU results in the judgment of the ECJ in which it determines whether and in what extent the Member State in question had failed to fulfill its obligations under the TFEU. The Member State is then ordered to comply with the judgment of the ECJ. If it fails to do so, the Commission may according to the Art. 260 TFEU bring the matter back to the ECJ and initiate the second round “infringement proceeding in which the ECJ may impose the financial sanctions. More on the infringement proceedings based on the TFEU. 502 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) compliance with the Art. 10a of the EIA Directive and nothing else. The shortcomings of the Czech EIA Act regarding the public participation and access to justice were reiterated in June 2012 by the Aarhus Convention Compliance Committee in its findings and recommendations with regard to communication ACCC/2010/50.269 Based on the communication from one of the Czech environmental NGOs the Aarhus Convention Compliance Committee found inter alia that the Czech EIA Act fails to provide for effective public participation during the whole decision-making process, to ensure that the outcome of the public participation in the EIA is duly taken into account in the subsequent licensing procedures, to ensure that all the members of public concerned have an access to review procedures, and fails to ensure that the NGOs meeting the requirements for being regarded as public concerned can seek review not only on procedural, but also on substantial grounds.270 On April 25, 2013 the Commission launched the new infringement action (no. 2013/2048) against the Czech Republic due to incorrect transposition of the Art. 1, 2, 3, 4, 5, 6, 7, 8, 9, 11 and 13 and Annexes I, II, III and IV of the EIA Directive in the Czech law. In its formal notice, the Commission criticized the entire design of the Czech EIA procedure. The Commission emphasized, in particular, that the regulation of subsequent licensing procedures did not reflect the requirements of the EIA Directive. This was despite the fact that the EIA Directive requirements allow flexible licensing procedure if the Member State has chosen to introduce a separate model of the EIA procedure.271 In
269. See U.N. Econ. & Soc. Council [ECOSOC], Sub-Comm’n Economic Comm’n for Europe, Compliance Comm., Findings and Recommendations with Regard to Communication ACC/C/2010/50 Concerning Compliance by the Czech Republic, ¶ 1-12, U.N. Doc. ECE/MP.PP/c.1/2012/11 (Oct. 2, 2012) (outlining the basis for the complaint and the allegations therein). 270. See id. ¶ 89–90 (explaining the Czech Republic’s shortcomings in meeting the requirements and offering recommendations on procedures to amend the failures). 271. See Explanatory Memorandum to the Bill proposing amendment of the EIA Act elaborated by the Czech Ministry for Environment. In Czech: Důvodová zpráva k návrhu zákona, kterým se mění zákon č. 100/2001 Sb., o posuzování vlivů na životní prostředí a o změně některých souvisejících zákonů (zákon o posuzování vlivů na životní prostředí), ve znění pozdějších předpisů, a další související zákony. HOW LONG CAN THE WOLF BE TRICKED? 503 particular the Commission criticized the most the following features of the Czech EIA Act: The outcomes of the EIA procedures are not binding in its content for the subsequent licensing process. After the EIA of a project is concluded the project the Czech law allows for substantial changes of project during the subsequent licensing procedures rendering the result of the EIA ineffective. There are still insufficient guarantees for public participation in the subsequent licensing procedures and for timely and efficient access to justice for members of public concerned.272 The Commission asked the Czech Republic to redress all the shortcomings mentioned in its formal notice from April 2013 by the end of 2014. All the legislative changes had to be in force by January 1, 2015 otherwise the Commission would proceed to the next stage of the infringement procedure, i.e. to a reasoned opinion. Issuing a reasoned opinion in this matter would have serious consequences for the Czech Republic because the Commission indicated that it would stop the access of the Czech Republic to the money from EU funds not only for future project, but also for the projects in progress. Besides that the Czech Republic could also face financial sanctions for non-compliance of the Czech EIA law with the EIA Directive. The financial sanctions could amount € 2 million (lump sum) and a penalty payment up to € 10.000 per day.273 Only under such threatening circumstances did the Czech politicians finally state that complying with the requirements of the EIA Directive was the Czech Republic’s highest priority.
C. New Amendment of the Czech EIA Law: Major Problems Finally Addressed?
On 3 September 2014 the Czech government approved the bill proposing amendment of the EIA Act and other related laws prepared by the Ministry for Environment in cooperation with other ministries.274 The bill was then
272. Id. at 2. 273. Id. at 5. 274. See Esmerck, Czech Republic: Ministry Prepares Law Amendment on EIA, ESMERCK, (May 6, 2014) (explaining the legislature’s adoption of an amendment to the Czech EIA law to be in compliance with
504 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) presented to the House of Deputies and afterwards to the Senate. Both of the houses of Parliament pushed through some changes of the bill. Finally on February 10, 2015, the House of Deputies passed the bill by 104 votes from the 168 deputies present. After signature by the President and the Prime Minister the new law was promulgated under no. 39/2015 in the Collection of Laws (Sbírka zákonů). The amendment came into force on April 1, 2015.275 The amendment brings significant changes in an attempt to bring the Czech EIA Act in compliance with the EIA Directive. After the changes, however, the resulting amendment has also created several complications not only for public participation, but also to the licensing system.276 It is therefore questionable whether it will in effect remedy the shortcomings criticized by the Commission. From perspective of this paper, it is interesting to look at the recording of debates in both of the houses of the Czech Parliament when the Czech political representation discussed the EIA amendment. The bill was introduced by the Minister for Environment who himself stated that the bill was prepared solely to promptly respond to the requirements of the EU Commission. The EU Commission had lost its patience with the Czech Republic and threatened to block EU funds unless the Czech Republic brought its EIA law in compliance with the EIA Directive. The Minister for Environment also assured the Senate that the amendment brought only temporary changes; the government planned to prepare a complex conceptual change of project licensing that would streamline the existing multilayer decision-making into single licensing procedure. The main changes that came into force on April 1, 2015 are as follows: The environmental impact statement (EIS) as a result of the EIA procedure will be binding in its content for the licensing authority deciding in the subsequent proceedings whether to grant a permit or not.
the EU directive) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 275. See id. (stating the effective date as April 1, 2015). 276. See Esmerck, Czech Republic: New EIA Law Perceived Critically, ESMERCK, (Dec. 15, 2014) (explaining the construction industry’s discontent with the requirements of the new law) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). HOW LONG CAN THE WOLF BE TRICKED? 505
The projects will require the so-called coherence stamp. At least 30 days prior to submitting an application for license (or permit) the applicant has to submit the project documentation which will be part of the license application to the EIA authority who will certify that the project documentation is in line with the EIS and that the project has not significantly changed since the EIS was issued. If the EIA authority finds out that the project has changed it will issue a negative statement, which will block issuing the license. The EIA Act explicitly says that the licensing authority has to take into account the EIA documentation and eventually also the public comments. There is finally a definition of public concerned. The Art. 3 letter i) of the amended EIA Act defines the public concerned as (1) a person whose rights or duties could be impaired by licensing the project, or (2) non-profit entity whose main purpose of activities as defined in the statutes is protection of environment or public health and which exists at least three years prior to licensing of the project or which is supported by at least 200 people. Members of public concerned have a standing in the subsequent licensing procedure. The amended EIA Act explicitly mentions that the members of public concerned may challenge procedural and substantive legality of the project license in court proceedings. Without a need to file a motion the court will always have to consider granting a suspensory effect to the action filed by the members of public concerned. The governmental bill proposing amendment of the EIA Act originally included a provision on automatic suspensory effect of the action filed by public concerned. This was changed during legislative process. The court will grant the suspensory effect only if there is a risk that carrying out the project will lead to serious harm on environment. The critics of this provision rightly point out that without any motion filed, the court will have no evidence as to whether there is a risk of environmental harm so it will be hard to judge rightly whether to grant the suspensory effect or not. Therefore the provision on suspensory effect may not be that effective as originally intended. The licensing procedures are opened to wide public. The amended EIA Act sets what documents and information regarding the subsequent licensing procedure must be disclosed. Members of wide public do not have a standing in licensing procedure unless they qualify as public concerned. The members of wide public may lodge their comments on 506 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) documents and information disclosed by the licensing authority. Despite the fact that among the EU Member States the Czech Republic is a straggler when it comes to the implementation of EU environmental policy and law, the Czech politicians dared to say publicly when debating over the EIA Act amendment that “we are again unnecessarily too strict” and that “it is not necessary to set stricter rules than the EU commands. We do not have to be more papal than the Pope, as it is usual here in the Czech Republic . . . .”277 Czech politicians also warned openly that the amendment gives the environmental associations and environmental activists too much power over the fate of various “strategic” projects. The concern being that the amendment will allow activists to lodge frivolous court petitions. Some politicians do not even hesitate to label the environmental NGOs as “eco-terrorists, a special brand of terrorists who block important projects, e.g. construction of new highways and by doing so cause damages worth millions CZK and are responsible for deaths of those who died in car accidents due to lack of quality infrastructure.”278 Such a resistance against doing anything above the EU environmental requirements and ignorance of democratic values shows that the Czech democracy and politics are still very immature.
VIII. Conclusion
The environmental impact assessment is globally recognized to be one of the most important tools for integrating environmental considerations into decision- making and by doing that it helps to prevent environmental harm and contributes to sustainable development.279 Inherently the environmental impact assessment requires the participation of all stakeholders, including citizens, local
277. See, e.g., Speeches of the Czech senators Pavel Eybert and Petr Gawlas during Senate debates regarding the amendment of the EIA Act in Protocol from the 5. 1st day of meeting of the Senate (Jan. 14, 2015). available at http://www.senat.cz/xqw/xervlet/pssenat/htmlhled?action=doc&value=74955 (Czech only). 278. Id.; see also speeches of Pavel Eybert, Petr Šilar and Jaroslav Kubera. 279. See supra Part I (explaining the history and importance of EIAs and their high regard among nations). HOW LONG CAN THE WOLF BE TRICKED? 507 communities and non-governmental organizations.280 The extent to which the public is allowed to participate in decision- making and the law enforcement regarding environmental protection is an important democratic indicator. In the countries with strong post-Communist culture, the implementation of public participation standards, including access to information and legal remedies, proves to be the hardest part. History matters, but can forty years of experiencing the Communist regime’s influence on the country’s democratic performance so heavily that no other historical experience matters?281 After the change of regime in 1989 the Czech Republic experienced a couple of enthusiastic years full of determination to reconnect with its pride of being once the most developed part of the Austrian-Hungarian Empire and living in a prosperous democracy in the inter-war period.282 During a short wave of enlightened law drafting, many important environmental laws were adopted and the ambition to be a leader in environmental policymaking was nurtured, e.g. by initiating process Environment for Europe that led to the adoption of the UNECE Convention on the Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus Convention).283 Soon after 1989 the enthusiasm was replaced by a culture of constant discontent and blaming others for the hardship of transformation despite the fact that there was a substantial foreign financial and technical support. The high hopes for setting an example in environmental protection were struck down by a pragmatic politics oriented towards economic growth. After June 1992 the environmental protection was no longer a number one priority of the Czech political representation, but the importance of environmental protection for the EU accession proved to serve as a stabilizing factor guaranteeing that the Czechs will have to meet at least the minimum requirements set by the EU. The changes of existing laws and adoption of new ones was often too fast and uncritical transplantation without sufficient time to absorb
280. Id. 281. See supra Part II (providing a background of the Czech Republic’s political history). 282. See supra Part IV (describing the Czech Republic’s adoption of E.U. directives regarding EIA law and other environmental measures). 283. Id. 508 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) the changes and gain support from all stakeholders. The Czech governments have tended to interpret the ‘minimum’ requirements in their own way and instead of exercising greater effort to implement the EU law correctly they have kept blaming the EU for redundant administrative burdens and costly changes of law. The story of Czech environmental impact assessment law, especially the part concerning public participation clearly demonstrates that the Czech democracy is still rather immature and will need more time and effort to overcome the old Communist-regime habits that project themselves into disrespect for law, ignorance of citizens’ view and lack of constructive communication between public authorities, businesses and citizens. An Increase in Beach Reconstruction Projects May Mean a Decrease in Property Rights: The Need for a Multi- Factor Balancing Test when Protecting Waterfront Property
Amy Forman* Abstract
In recent years, many states have struggled to come up with an adequate solution to the negative effects of climate change, specifically rising sea levels and severe storms. The most common and successful method of protection, erecting barriers on the waterfront, not only raises its own environmental concerns, but also forces the government to invade on a homeowner’s property rights for the sake of protecting the beach. Recent cases such as the Borough of Harvey Cedars v. Karan, illustrate that when courts abandon traditional property rights, it becomes easier to implement protective measures and save their waterfront properties. This protection comes at a cost, however, as many of these protective methods end up causing long-term environmental harm. On the other hand, if courts choose to respect all traditional property rights, it avoids any detrimental impact those structures would have on the environment but fails to offer any protection to waterfront properties. Courts must find a way to balance both the property concerns and environmental concerns. This can be done through a multi-factor balancing test, including the following three questions: (1) are there other more environmentally friendly alternatives that can be implemented; (2) does the value of damage done to the environment outweigh the value of protecting the homeowner receives; and (3) will
* Amy Forman ([email protected]) is a J.D. candidate at Washington & Lee University School of Law, May 2015, and a Senior Articles Editor for the Journal of Energy, Climate, and the Environment. Amy would like to thank Professor Christopher Seaman for his guidance and encouragement throughout this writing process.
509 510 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) denial of this protective measure cause imminent, rapid, or sudden loss of property? This test will weigh the interests of both property and environmental issues to determine when it is adequate to compromise traditional property rights and which protective measures are permissible.
Table of Contents
I. Introduction ...... 510 II. Environmental Concerns/Property Law ...... 515 A. The Explanation for the Increase in Beach Erosion, Rising Sea Levels, and More Frequent Coastal Storms: ...... 515 B. Using Property Law as a Response ...... 519 III. The Borough of Harvey Cedars v. Karan ...... 523 A. Background ...... 523 B. Lower Court Decision ...... 525 C. New Jersey Supreme Court Decision ...... 526 D. Aftermath of Harvey Cedars v. Karan ...... 527 IV. Why Harvey Cedars Should Not Be Universally Applied ... 529 A. Environmental Concerns ...... 529 1. Beach Erosion ...... 530 2. Loss of Habitats ...... 531 3. Expensive and Temporary ...... 533 V. More Equitable Solution: Multi-Factor Balancing Test ...... 533 A. Will Denial of this Protective Measure Cause Imminent, Rapid, or Sudden Loss of Property? ...... 536 B. The Multi-Factor Balancing Test ...... 540 1. Are There Other More Environmentally Friendly Alternatives That Can Easily Be Implemented? ...... 540 2. Can the Costs be Justified? ...... 544 C. Applying the Multi-Factor Balancing Test to Harvey Cedars ...... 549 IV. Conclusion ...... 551
I. Introduction
It has become increasingly evident that the effects of climate change on the United States’ beaches and wetlands are
BEACH RECONSTRUCTION 511 creating a crisis.1 Many states today find themselves fighting a fierce battle in an attempt to deal with the increasing problems associated with rising sea levels and the increase in devastating storms. 2 In attempts to prevent further damage, waterfront property owners have found themselves in court battling over the issue of protecting their property at the expense of some of their traditional property rights.3 In recent years, the effects of climate change have been increasingly detrimental to beaches.4 Climate change has caused a rise in sea levels and an increase in beach erosion.5 As a result, both environmental resources and infrastructures are being destroyed at an alarming rate. 6 Additionally, by warming sea temperatures, climate change is causing an increase in the frequency and severity of coastal storms.7 These coastal storms have the power to destroy whole towns.8
1. See Thomas Ruppert, Reasonable Investment-Backed Expectations: Should Notice of Rising Seas Lead to Falling Expectations for Coastal Property Purchasers?, 26 J. LAND USE & ENVTL. LAW 239, 239–40 (2011) (discussing the worsening conditions associated with rising sea levels and the challenges presented in finding a solution). 2. See James G. Titus, Does the U.S. Government Realize that the Sea Is Rising? How to Restructure Federal Programs so that Wetlands and Beaches Survive?, 30 GOLDEN GATE U. L. REV. 717, 733 (2000) (discussing the primary responses to sea levels rising). 3. See generally Borough of Harvey Cedars v. Karan, 70 A.3d 524 (N.J. 2013) (assessing whether compensation is owed to landowners who actually benefit from a taking to protect beachfront property). 4. See Elizabeth C. Black, Climate Change Adaptation: Local Solutions for a Global Problem, 22 GEO. INT’L L. REV. 360, 368 (2010) (discussing the difficult consequences of climate change). 5. See id. at 374–76 (examining the increase in beach erosion). 6. See J. Peter Byrne, The Cathedral Engulfed: Sea-Level Rise, Property Rights, and Time, 73 LA. L. REV. 69, 77 (2012) (discussing the environmental consequences of rising sea levels). 7. See Sea Temperature Rise, NATIONAL GEOGRAPHIC (last visited Mar. 2, 2014), http://ocean.nationalgeographic.com/ocean/critical-issues-sea- temperature-rise/ (“Warmer surface water dissipates more readily into vapor, making it easier for small ocean storms to escalate into larger, more powerful systems.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 8. See Hurricane Sandy Fast Facts, CNN (Nov. 5, 2014, 12:10 PM), http://www.cnn.com/2013/07/13/world/americas/hurricane-sandy-fast-facts/ (chronicling Hurricane Sandy’s destruction on the east coast) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT).
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Towns located along shorelines are using beach reconstruction and replenishment projects to fight back against the damages caused by climate change.9 These projects involve the state or local government constructing sea walls, dunes, or some type of barrier on private property and require the government to obtain an easement from the property owner.10 When the property owner refuses to grant the easement, the governments must exercise its eminent domain power.11 Issues surrounding property rights have resulted in an increase in litigation.12 The increase in litigation combined with the need for immediate relief has led many courts to compromise or reduce traditional property rights. 13 Recently, in Borough of Harvey Cedars v. Karan, the New Jersey Supreme Court dramatically reduced the amount awarded to beachfront property owners by altering the traditional calculation method used to determine just compensation to include general benefits. 14 The New Jersey
9. See Mark Di Ionno, Hurricane Sandy Recovery Still a Work in Progress, THE STAR-LEDGER (Oct. 30, 2014, 7:04 AM), http://www.nj.com/news/index.ssf/2014/10/hurricane_sandy_recovery_still_a_wo rk_in_progress_di_ionno.html (reporting on the beach reconstruction efforts in New Jersey towns after Hurricane Sandy) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 10. See Wayne Parry, Fight Over Beach Sand Gets Dirty, NBC (Apr. 11, 2010, 12:17 PM), http://www.nbcnews.com/id/36390707/ns/us_news- environment/#.UwuZ6P0qDwI (discussing the need for the U.S. Army Corps of Engineers to obtain easements from the oceanfront homeowners) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 11. See Rachel S. Meystedt, Note, Stop the Beach Renourishment: Why Judicial Takings May Have Meant Taking a Little Too Much, 18 MO. ENVTL. L. & POL’Y REV. 378, 391 (2011) (discussing the government’s power under the doctrine of eminent domain). 12. See Michael A. Hiatt, Note, Come Hell or High Water: Reexamining The Takings Clause In a Climate Changed Future, 18 DUKE ENVTL. L. & POL’Y F. 371, 371 (2008) (examining how large-scale sea level rise is causing a collision in property rights with the takings clause and public trust doctrine). 13. See Keith Goldberg, Energy Boom Tests State Eminent Domain Laws, LAW360 (May 12, 2014, 2:16 PM), http://www.law360.com/articles/535660/energy-boom-tests-state-eminent-domain- laws (discussing an increase in litigation and scrutiny over eminent domain laws) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 14. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 543 (N.J. 2013) (holding that calculation of just compensation must include benefits that the homeowner obtained from dunes built for storm protection).
BEACH RECONSTRUCTION 513
Supreme Court and other courts severely overlook the implications of compromising traditional property rights—both on property law and the environment.15 When a state or local government is only required to pay a minimal amount of compensation, it becomes easier for the government to construct sea walls and other barriers.16 While the protective barriers provide immediate relief to the oceanfront property, the environmental damage they cause is extensive and long-term.17 These protective barriers have been found to actually increase beach erosion and destroy animal habitat. 18 Additionally, the protective barriers are expensive to construct and only provide temporary protection.19 Courts need to find a balance between property owner’s need for immediate relief from the damages caused by climate change and protecting the environment from further destruction. When judges alter traditional property rights, making beach protective barrier construction easier for states, this Note argues that they ignore long-term environmental costs. 20 If, however, courts continue to follow the traditional just compensation calculation method, most beach protection projects will be too expensive to implement.21 Property owners will suffer extreme damage to their property and possibly lose their beaches all together.
15. See infra Part V (suggesting a better way to analyze these cases). 16. See Tracey Samuelson, New Jersey Supreme Court sides with Harvey Cedars in the Dune Compensation Case, NEW WORKS (July 8, 2013), http://www.newsworks.org/index.php/local/new-jersey/57029-nj-supreme-court- sides-with-harvey-cedars-in-dune-compensation-case (discussing the possibility of beach replenishment projects becoming too expensive to implement if courts do not consider general benefits) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 17. See infra Part IV.A (discussing sea walls and other forms of armoring as a response to climate change). 18. See infra Part IV.A (explaining that erosion actually increases when sea walls are used). 19. See infra Part IV.A (examining how the costs of sea walls outweigh the benefits). 20. See infra Part V (discussing a more equitable solution, a multi- factor balancing test). 21. See infra Part III.D (discussing the aftermath of Borough of Harvey Cedars v. Karan).
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When beachfront property owners face a likelihood of an imminent threat to their property, as a general rule court should apply the holding in Harvey Cedars. In these cases, courts should consider general benefits and special benefits when calculating just compensation. 22 The holding in Harvey Cedars is not universally applicable to all eminent domain cases involving beach reconstruction and replenishment projects.23 When denial of the protective barrier does not cause a likely imminent threat to the oceanfront property, courts should adopt a multi-factor balancing test to help weigh the property concerns with the environmental issues. 24 When applying this multi-factor balancing test, courts should consider: (1) whether there are other more environmental friendly alternatives that can easily be implemented and (2) whether the costs of implementing the constructive barrier can be justified.25 Part II of this Note will address the causes behind the destruction of our beaches and how this has developed into the pressing issue it is today. 26 This Part will also discuss how property law is intertwined with this issue and how certain aspects of property law, specifically takings, are being used as a response to the problem.27 Part III will discuss the recent New Jersey case Harvey Cedars v. Karan in relation to the issue of compromising property rights at the expense of the environment.28 Part IV will critique the legal outcome in Harvey Cedars and discuss how the courts may have improperly weighed the competing interests. 29 Part V will discuss a multi-factor balancing test that presents a more equitable solution to issues
22. See infra Part III (suggesting use of the Court’s reasoning in Borough of Harvey Cedars v. Karan). 23. See infra Part IV (discussing why Harvey Cedars v. Karan should not be universally applied). 24. See infra Part IV (discussing the applicability of the Harvey Cedars v. Karan to other jurisdictions). 25. See infra Part V (proposing a multi-factor balancing test). 26. See infra Part II (explaining the current environmental concerns and its history). 27. See infra Part II (discussing the intersection of property law and environmental concerns). 28. See infra Part III (noting the most recent and relevant case to the subject at hand). 29. See infra Part IV (analyzing the Harvey Cedars v. Karan case).
BEACH RECONSTRUCTION 515 that arise in these situations similar to the one in Harvey Cedars.30
II. Environmental Concerns/Property Law
A. The Explanation for the Increase in Beach Erosion, Rising Sea Levels, and More Frequent Coastal Storms
Today state and local governments find themselves forced to address the inevitable consequences of climate change—which include rising sea levels and severe storms.31 In the 2009 Climate Impact Report, the United States Global Change Research Program stated that climate change is caused by the emission of greenhouse gases and the accumulation of these gases in the atmosphere. 32 Scientists have determined the emissions of carbon dioxide and other gases will significantly warm the Earth in the next century.33 Greenhouse gases allow energy from the sun into the Earth’s atmosphere but prevent it from escaping— thus causing polar ice to melt, a reduction in the reflection of sun’s rays, and warmer seawater through the absorption of more of the sun’s energy.34
30. See infra Part V (proposing a better, more relevant test than the one suggested in Harvey Cedars v. Karan). 31. See Black, supra note 4, at 368–73 (providing examples of how New York City, Cape Town, and London have addressed climate change). 32. See U.S. GLOBAL CHANGE RESEARCH PROGRAM, GLOBAL CLIMATE CHANGE IMPACTS IN THE UNITED STATES 19 (2009), available at http://ccsl.iccip.net/climate-impacts-report.pdf (discussing the causes of climate change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 33. See WORKING GROUP I, INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, CLIMATE CHANGE 1995: THE SCIENCE OF CLIMATE CHANGE, 84–85 (1996) [hereinafter IPCC] (stating that “all models” create such a projection); see also James G. Titus, Does the U.S. Government Realize that the Sea is Rising? How to Restructure Federal Programs so that Wetlands and Beaches Survive?, 30 GOLDEN GATE U. L. REV. 717, 718 (2000) (“Scientists throughout the world, as well as the U.S. Government, have concluded that emissions of carbon dioxide and other gases will warm the Earth 1.03.05 degrees Celsius in the next century.”). 34. See U.S. GLOBAL CHANGE RESEARCH PROGRAM, supra note 32, at 17–18.
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As a result of melting ice and increased water temperatures, the Intergovernmental Panel on Climate Change estimated that sea levels will rise approximately two feet per century for the next few hundred years, with the possibility of rising as much as fifteen feet by the year 2200.35 This rise in the sea level is significant enough to destroy both environmental resources and infrastructures by eroding or inundating beaches and coastal wetlands.36 In addition to rising sea levels, the United States is faced with the threat of increasing coastal storms.37 As a consequence of the rise in sea temperatures, coastal storms are expected to increase in number and severity. 38 Specifically, the warmer surface water dispels more readily into vapor, making smaller storms become larger and more powerful.39 Future storms will have “larger peak wind speeds and more heavy precipitation.”40 As a result, the greenhouse warming will cause more intense hurricanes with a higher rainfall rate.41 “With climate change,
35. See IPCC, supra note 33 (discussing the future effects of rising sea levels). 36. See Byrne, supra note 6, at 77 (discussing the environmental consequences of rising sea levels). 37. See Black, supra note 4, at 364 (discussing the dangers of flooding with the increase in coastal storm severity). 38. See Sea Temperature Rise, supra note 7 (listing stronger storms as an effect of higher sea temperatures). 39. See id. (“Warmer surface water dissipates more readily into vapor, making it easier for small ocean storms to escalate into larger, more powerful systems.”). 40. See INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, SUMMARY FOR POLICYMAKERS, in CLIMATE CHANGE 2007: THE PHYSICAL SCIENCE BASIS 2 (2007), available at http://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1- spm.pdf [hereinafter IPCC 2] (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also John R. Nolon, Regulatory Takings and Property Rights Confront Sea Level Rise: How Do They Role, 21 WIDENER L. REV. 735, 741 (2012) (“Specifically, these future tropical cyclones will have ‘larger peak wind speeds and more heavy precipitation associated with ongoing increases of tropical sea-surface temperature.”). 41. See Nolon, supra note 41 (“Current research on climate change and hurricanes has indicated that ‘it is likely that greenhouse warming will cause hurricanes in the coming century to be more intense globally and have higher rainfall rates than present-day hurricanes.”).
BEACH RECONSTRUCTION 517 what traditionally have been ‘100-year floods’ may become 10- year floods.”42 The consequences of rising sea levels and these powerful coastal storms are troubling. On the environmental side, there has been an increase in the erosion and loss of costal islands, wetlands, and sand dunes.43 Although the exact impact of sea level rise is uncertain, in recent years it has been discovered that the effects of rising sea levels on coastal wetlands are more destructive than previously thought. 44 Additionally, several coastal property owners are now faced with threats of flooding due to the increase in frequency and severity of coastal storms.45 This flooding also has the ability to damage dams, levees, roads, sewers, subways, and airports.46 Coastal communities who choose to ignore the rising sea levels do so “at their own peril.” 47 Without state action, it is inevitable that private and public property will be physically destroyed. 48 Many of the consequences of climate change are irreversible.49 It is difficult to determine what the actual effects of climate change will be or predict the scale on which they will
42. MICHAEL HUBER, REFORMING THE UK FLOOD INSURANCE REGIME: THE BREAKDOWN OF A GENTLEMAN’S AGREEMENT 9 (ESRC Centre for Analysis of Risk and Regulation, Discussion Paper No. 18, 2004), available at core.ac.uk./download/pdf/219237.pdf (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 43. See Byrne, supra note 6, at 77 (discussing the consequences of rising sea levels). 44. See Niki L. Pace, Wetlands or Seawalls? Adapting Shoreline Regulations to Address Sea Level Rise and Wetland Preservation in the Gulf of Mexico, 26 J. LAND USE & ENVTL. L. 327, 333 (2011) (discussing a new study released in 2010 suggesting “that coastal wetlands are more sensitive to destruction by rising sea levels than previously thought”). 45. See Black, supra note 4, at 364 (“Flooding already is a significant threat, and its risks will only increase as severe storms become more frequent.”). 46. See id. at 365 (discussing the damage storm-related flooding can have). 47. See Pace, supra note 44, at 330 (discussing the visible impacts of climate change). 48. See Byrne, supra note 6, at 69 (discussing the effects inundation and storm surges will have on property). 49. See Black, supra note 4, at 360 (“[T]he consequences of climate change are already irreversible.”).
518 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) occur.50 Additionally, sea levels are predicted to continue rising at a steady pace in the future. 51 Thus, state and local governments are forced to come up with effective solutions to this problem immediately.52 In response, waterfront property owners, as well as state governments, have chosen to fight back and protect their property through methods such as beach nourishment and armoring. 53 Beach nourishment involves replacing additional sand on eroded beaches. 54 Numerous states have initiated programs to place additional sand on their beaches.55 Armoring involves building hard structures, such as bulkheads, sea walls, groins, and revetments, along the shoreline.56 Armoring is used to forestall the negative effects of climate change by acting as a barrier to the sea. 57 These structures “eliminate the intervening beach, wetlands, and other intertidal zones, but leave the dry land relatively unaffected.”58 In many coastal areas, such as California, coastal landowners have relied largely on armoring to protect their property.59 There are two different types of armoring: hard armoring and soft armoring. Hard armoring involves the use of constriction
50. See id. at 360 (“[I]t is extremely difficult to predict what the actual effects will be and on what scale they will occur.”). 51. See David Rusk, Comment, Fix It or Forget It: How the Doctrine of Avulsion Threatens the Efficacy of Rolling Easements, 51 HOUS. L. REV. 291, 298 (2013) (“Sea levels have risen over the last decades and are projected to continue rising at a steady pace.”). 52. See Black, supra note 4, at 368 (discussing the difficult consequences of climate change and rising sea levels). 53. See Pace, supra note 44, at 328 (“[W]aterfront property owners, in hopes of beating back erosion and rising seas, are frequently erecting hard structures along the water’s edge.”). 54. See id. at 337 (discussing the practice of beach nourishment). 55. See Titus, supra note 33, at 733 (explaining the primary responses to sea level rise). 56. See Pace, supra note 44, at 338 (discussing shoreline armoring and its impact on the environment). 57. See Meg Caldwell & Craig Holt Segall, No Day At The Beach: Sea Level Rise, Ecosystem Loss, And Public Access Along The California Coast, 34 ECOLOGY L.Q. 533, 540 (2007) (explaining how armoring leaves beaches unable to retreat before the rising sea). 58. Titus, supra note 33, at 733. 59. See Todd T. Cardiff, Comment, Conflict in the California Coastal Act: Sand and Seawalls, 38 CAL. W. L. REV. 255, 255 (2001) (“Coastland landowners in California are building seawalls at an alarming rate.”).
BEACH RECONSTRUCTION 519 materials, such as steel and concrete.60 Soft armoring, however, involves the use of natural and living materials to restore beaches and build sand dunes.61 Towns have found themselves dealing heavily in property law as a result of this new reliance on armoring.62
B. Using Property Law as a Response
Numerous towns located along the shorelines facing erosion and destructive coastal storms hope to implement beach reconstruction and replenishment projects immediately. In order to be effective, these protective measures will have to intrude into private oceanfront property. States are required to obtain the consent of oceanfront homeowners to a loss of their land.63 Thus, the homeowners’ property rights and the state’s authority under the Constitution to take private land play a vital role in beach reconstruction projects. The Takings Clause of the Fifth Amendment of the United States Constitution provides that no “private property be taken for public use, without just compensation.” 64 Essentially, the Fifth Amendment grants the government right to physically take possession of property, under the conditions that it is for public use and the property owner receives just compensation. 65 The
60. See Byrne, supra note 6, at 86 (discussing hard armoring and the materials used in its creation). 61. See id. (discussing soft armoring and the materials used in its creation). 62. See id. (stating that towns are finding themselves using property law for this purpose) 63. See Parry, supra note 10 (stating that the United States Army Corps of Engineers cannot move forward with its beach project until all oceanfront property owners have signed easements permitting new sand to be pumped onto their personal property). 64. See U.S. CONST. amend. V (“[N]or shall private property be taken for public use, without just compensation”). 65. See Byrne, supra note 6, at 85 (stating that the Fifth Amendment was “intended to condition the exercise of eminent domain on compensation. Understandably it was extended to require compensation when the government otherwise physically takes possession of property without the formalities of condemnation.”).
520 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) government may take private property either through a regulatory taking or through the right of eminent domain.66 One type of regulatory taking, a per se taking, occurs when the government permanently invades on a private property owner’s right to exclusive possession or the owner’s right to exclude others from his private property.67 Eminent domain is the government’s sovereign power to take property from private landowners.68 If the government takes private property for public use, but pays the property owner just compensation, the taking is considered constitutional under the government’s eminent domain authority.69 States have begun to exercise their power that flows from the per se takings doctrine and eminent domain to compel waterfront property owners to permit the town to build “shields” from the destructive effects of rising sea levels and devastating storms on private property.70 These projects cannot begin until all oceanfront property owners have signed easements permitting the state to either pump additional sand onto their property or build protective structures along the edge of their property.71 Many oceanfront property owners willingly sign the easements. 72 Numerous people, however, have refused to sign the easements fearing the government might find other uses for their property, such as
66. See Meystedt, supra note 11, at 386 (“Under current property law, the government may take the property of an individual either through a regulatory taking or through the right of eminent domain.”). 67. See id. at 386 (discussing and defining the two types of regulatory takings). 68. See Tiffiny Anne Douglas, Note, Florida’s Take on Takings: An Appeal to Re-Balance the Individual’s Rights and the State’s Needs, 4 FL. COASTAL L.J. 207, 207 (2003) (discussing the power of eminent domain and its constitutional limits). 69. See Meystedt, supra note 11, at 387 (“If the government takes private land for public use but pays the property owner just compensation, the taking is constitutional under the right of eminent domain.”). 70. See Kate Zernike, Trying To Shame Dune Holdouts At Jersey Shore, N. Y. TIMES, Sept. 4, 2013 (discussing the Army Corps solution to the damaging effects of Hurricane Sandy in New Jersey). 71. See Parry, supra note 10 (discussing delays in beginning construction are the result of hold out homeowners). 72. See id. (identifying that nearly half of the homeowners had signed the easements).
BEACH RECONSTRUCTION 521 building boardwalks. 73 Additionally, many people fear the government is taking away their property rights.74 When these property owners refused to grant the easements, it often leaves a gap in the protective structure, which negates the structure’s ability to defend against severe weather.75 As a result, several towns have started eminent domain proceedings against those property owners who refused to willingly sign easements.76 To begin an eminent domain proceeding, the government must meet both the public use requirement and the just compensation requirement.77 The public use requirement is not an issue in these cases. 78 The second requirement, just compensation, has presented obstacles for many states, resulting in an increase in litigation.79 Because the states are asserting control over private land for a public use, there is no argument this is a taking. 80 This taking imposes a significant financial burden on the state to provide private property owners with the
73. See id. (stating that many homeowners are holding out on signing easements out of fear the government will build boardwalks, parking lots, or public restrooms next to their homes). 74. See id. (stating that many reasonable person have developed a fear that the government is trying to take away their property rights). 75. See Zernike, supra note 70 (discussing the damage caused to homes because of gaps in the dunes left by neighbors). 76. See MaryAnn Spoto, Toms River to Start Eminent Domain Proceedings Against 16 Oceanfront Property Owners, THE STAR LEDGER (last visited Mar. 24, 2015), http://www.nj.com/ocean/index.ssf/2013/10/toms_river_votes_to_start_eminent_d omain_proceedings_against_16_oceanfront_property_owners.html (stating that following similar action taken by Mantoloking, Toms River, New Jersey council has voted to start eminent domain proceedings against 16 oceanfront property owners who have refused to sign easements for a massive federal dune construction project) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 77. See Byrne, supra note 6, at 85 (stating that the requirements for a taking under the Fifth Amendment are both public use and just compensation). 78. See Michael A. Hiatt, Come Hell or High Water: Reexamining The Takings Clause In a Climate Changed Future, 18 DUKE ENVTL. L. & POL'Y F. 371, 371 (2008) (explaining the primary concern of public trust doctrine is not public use). 79. See id. (discussing the impracticability of just compensation in all of these situations). 80. See id. (“[T]he state action . . . where the government either takes title to private land or subjects it to the public trust—has been considered an undisputed taking.”).
522 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) appropriate compensation.81 Additionally, because a substantial amount of private land is required to fight against these problems, it may be impracticable for the state to adequately compensate the numerous property owners involved.82 In partial takings cases, the land owner is “entitled to be compensated not only for the value of the land taken but also for any diminution in the value of the remaining land which may be attributable to the taking.” 83 The traditional rule when calculating just compensation is that only special benefits can be deducted from compensation or damages in takings cases. 84 Under the traditional rule, general benefits are not to be considered to reduce the amount of compensation awarded. 85 General benefits are “those produced by the improvement which a property owner may enjoy in the future in common with all other property owners in the area.”86 Special benefits are those that “differ in kind, rather than in degree, from the benefits which are shared by the public at large.”87 Special benefits are benefits particular to the property that is the subject of the condemnation and not the type of benefit that was the object of the project.88 These benefits are usually incidental benefits and may result from physical changes in the land.89
81. See id. (discussing the financial difficulties states face when implementing a large scale beach reconstruction project). 82. See id. at 371 (explaining the high cost of compensation is impractical in light of the massive nature of these projects). 83. See Ridgewood v. Sreel Inv. Corp., 28 N.J. 121, 125 (1958) (explaining the necessity of including benefits to the homeowner in the calculation of just compensation). 84. See E. H. Schopflocher, Annotation, Deduction of Benefits in Determining Compensation or Damages in Eminent Domain, 145 A.L.R. 7 (1943) (distinguishing between general and special benefits in calculating just compensation). 85. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526 (2013) (“[O]nly special benefits, not general benefits, flowing from a public project can be considered in calculating the enhanced value to the remaining property.”). 86. Id. at 532. 87. Id. 88. See id. at 529 (describing special benefits as ones which directly increase the value of the tract, rather than the neighborhood as a whole). 89. See id. (indicating that a special benefit generally isn’t one planned for or accounted for as part of the taking).
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Following this traditional compensation rule, the general benefit cannot be used to offset the amount of compensation a homeowner received.90
“When one considers the possibility that tens of thousands of square miles of land containing valuable coastal properties and entire cities such as Miami and New Orleans could become submerged, it seems impracticable for the states to protect and extend the public trust if they are required to provide full compensation to all private property owners.”91
Therefore, some courts have begun to alter this rule to include both general benefits and special benefits in calculating just compensation. 92 This reduces the amount of compensation a waterfront property owner will receive, making it easier and more affordable for states to implement these projects.93
III. The Borough of Harvey Cedars v. Karan
A. Background
The New Jersey Supreme Court recently held in Borough of Harvey Cedars v. Karan that calculation of just compensation for a taking under the Fifth Amendment was required to include the benefit that property owners obtained as a result of storm protection provided by dunes. 94 The U.S. Army Corps of Engineers and the New Jersey Department of Environmental
90. See id. at 526 (“[O]nly special benefits, not general benefits, flowing from a public project can be considered in calculating the enhanced value to the remaining property.”). 91. See Hiatt, supra note 78, at 381–82. 92. See Harvey Cedars, 70 A.3d at 536–37 (including general benefits as part of the calculation process in certain circumstances). 93. See id. at 531 (noting that the jury awarded the Karans $375,000, which would make projects unfeasible if the state was forced to pay that amount to every homeowner). 94. See id. at 541 (holding that calculation of just compensation was required to include benefits that homeowner obtained as a result of storm protection by dunes).
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Protection implemented a public project to provide protection to waterfront residents from beach erosion and threatening storms. 95 One part of the project involves pumping a massive amount of sand onto the beach to extend the shoreline seaward by 200 feet. 96 A second part of the project involved beach nourishment every seven years over a period of fifty years. 97 Lastly, the project called for construction of dunes along the entire length of the shore.98 The dune construction part of the project required the town to obtain easements on properties bordering the ocean.99 The town of Harvey Cedars in New Jersey was able to obtain sixty-six easements by voluntary consent of the oceanfront property owners. 100 Sixteen property owners, however, refused to consent to the construction of the dunes on their property.101 The Karans were one of those sixteen owners of beachfront property in the Borough of Harvey Cedars.102 The Karans rejected Harvey Cedar’s offer of $300 as compensation for both the land taken and any devaluation of the remaining property. 103 The Borough of Harvey Cedars exercised its eminent domain authority to take a portion of the Karan property to build a protective dune that connects with other dunes on neighboring waterfront property that runs the entire length of Long Beach
95. See id. at 527 (explaining the beach and storm protection project involved, which included beach replenishment and sand dunes). 96. See id. (discussing movement of sand back to the shore as part of the of the beach reconstruction project). 97. See id. (explaining how they would continue to replenish the beaches every seven years). 98. See id. (discussing the necessity of dune construction as part of the beach reconstruction project). 99. See id. (noting that takings are required to follow the process of eminent domain). 100. See id. (“The Borough acquired sixty-six easements by voluntary consent of the property owners.”). 101. See id. (stating that the owners of sixteen beachfront properties did not consent). 102. See id. (identifying the Karans as one of the withholding property owners). 103. See id. at 528 (“The Karans rejected the Borough's offer of $300 as compensation for both the land taken and any devaluation of the remaining property.”).
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Island in Ocean County, New Jersey.104 All parties agree that the Karans were entitled to “just compensation” for this taking of their property for a public project.105 The dispute centered on the proper way to calculate this “just compensation” when the taking could lessen and enhance the value of the property as a whole.106 The essential question: whether the calculation of just compensation should consider only special benefits, or should general benefits be included in the calculation as well.107
B. Lower Court Decision
The trial court refused to permit Harvey Cedars the opportunity to show that the dune increased the Karans’ property value by protecting it from the damage potentially caused by future storms.108 The court determined that general benefits were not to be included in the “just compensation” calculation. 109 The court reasoned the storm protection benefit was a general benefit because these dunes not only protect all property owners in Harvey Cedars but also add value to all of the included property. 110 The Karans were awarded $375,000 in damages, based primarily on the loss of their oceanfront view. 111 The
104. See id. at 526 (“The Borough of Harvey Cedars exercised its power of eminent domain to take a portion of the beachfront property of Harvey and Phyllis Karan to construct a dune that connects with other dunes running the entire length of Long Beach Island in Ocean County.”). 105. See id. (noting that the Karans entitlement to “just compensation” for the taking of a portion of their land was never in question). 106. See id. (stating that the focus of this case was how to properly calculate “just compensation” when the taking of the Karans property both decreased in part and increase in part the value of the remaining land). 107. See id. at 534 (stating that the issue before the court was solely an issue of law—“how to compute “just compensation” in a partial takings case”). 108. See id. at 526 (“The trial court, however, denied Harvey Cedars the opportunity to show that the dune enhanced the value of the Karans’ property by protecting it from the damage and destruction that is wrought by powerful storms and ocean surges.”). 109. See id. (stating that general benefits could not be included in the calculation). 110. See id. (classifying the storm protection benefit as a general benefit as it helped the community at large). 111. See id. (“The jury awarded the Karans $375,000 in damages, premised mostly on the loss of their oceanfront view.”).
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Appellate Division affirmed, agreeing with the trial courts conclusion that the protection afforded to the Karans’ property by the dune construction was a general benefit. 112 The Appellate Court concluded that “while defendant’s property may be benefited in somewhat ‘greater . . . degree’ than its inland neighbors, because it is closer to the ocean and therefore in somewhat greater danger of incurring storm damage, that is not a legally cognizable ‘special benefit’ for purposes of valuation in a condemnation case.”113
C. New Jersey Supreme Court Decision
The New Jersey Supreme Court reversed, concluding that “when a public project requires the partial taking of property, ‘just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property.”114 The Court reasoned that the calculation used by the Appellate Division, which does not consider a public project’s general benefits, led to a compensation award that did not reflect the owner’s true loss. 115 The Court acknowledged that the benefits of the dune project extended beyond the Karans to their neighbors further from the shoreline. 116 The Court argued, however, that it was clear the properties “most vulnerable to dramatic ocean surges and larger storms are frontline properties, such as the Karans.”117 Therefore, the Court concluded that the Karans benefited to a greater degree than their westward neighbors. 118 The Court stated that “reasonably calculated benefits—regardless of whether those benefits are enjoyed to
112. See Borough of Harvey Cedars v. Karan, 40 A.3d 75, 82 (N.J. App. Div. 2012), overruled by Borough of Harvey Cedars v. Karan, 70 A.3d 524 (2013) (affirming trial court’s decision that benefit was a general benefit). 113. Id. 114. Harvey Cedars, 70 A.3d at 526–27. 115. See id. at 527 (noting that the lower court essentially pretended the benefits did not exist). 116. See id. at 541 (“Unquestionably, the benefits of the dune project extended not only to the Karans but also to their neighbors further from the shoreline.”). 117. Id. 118. See id. (“Therefore, the Karans benefitted to a greater degree than their westward neighbors.”).
BEACH RECONSTRUCTION 527 some lesser or greater degree by others in the community—that increase the value of property at the time of the taking should be discounted from the condemnation award.”119 The Court held that calculation of just compensation was required to include benefit that homeowners obtained as a result of storm protection provided by dunes.120
D. Aftermath of Harvey Cedars v. Karan
This decision breaks from the long-standing common law distinction between general benefits and special benefits.121 The traditional rule holds that in the ordinary condemnation case, compensation is based on the value of the property at the time of the taking, disregarding depreciation or inflation attributable to the proposed improvement—the special benefits. 122 Thus, the New Jersey Supreme Court decided that, despite the damage caused to the Karans’ property, the protective benefit that the Karans received should be considered in calculating “just compensation,” thus reducing the amount they would originally have received. 123 With this new formula for calculating just compensation, the Karans settled for merely $1, as opposed to the $375,000 they were initially awarded.124 The New Jersey Supreme Court emphasized that without the dune project the Karans property had only a 27% chance of
119. Id. at 543. 120. See id. at 526 (holding that such benefits both uniquely and generally benefit the property). 121. See id. at 533 (discussing calculation methods of just compensation). 122. See Borough of Harvey Cedars v. Karan, 40 A.3d 75, 81 (N.J. Super. Ct. App. Div. 2012) (“The applicable rule in the ordinary condemnation case is that the proper basis of compensation is the value of the property as it would be at the time of the taking disregarding depreciation or inflation attributable to the proposed improvement.”). 123. Harvey Cedars, 70 A.3d at 533 (discussing the inclusion of protective benefit in calculation). 124. See MaryAnn Spoto, Harvey Cedars Couple Receives $1 Settlement for Dune Blocking Ocean View, THE STAR LEDGER (last visited Mar. 24, 2014), http://www.nj.com/ocean/index.ssf/2013/09/harvey_cedars_sand_dune_dispute_s ettled.html (discussing the Karans settlement deal) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT).
528 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) surviving fifty years without any storm damage. 125 The court stated “just compensation does not entitle a landowner to a windfall from a partial taking of property.”126 Therefore, in the eyes of the New Jersey Supreme Court, the fact that the dune would greatly protect the property increased the value and should be considered in calculating the compensation.127 The Karans were no longer entitled to the original award of $375,000.128 This decision is likely to decrease the amount of compensation of similarly situated homeowners when their properties are needed for beach replenishment or armoring projects.129 If the court had sided with the Karans, the result would likely be that these projects would be too expensive to implement. 130 This case deals with “soft” armoring because it involves a beach replenishment project of building dunes. 131 Although the effects of soft armoring are less detrimental on the environment than hard armoring, such projects still pose environmental risks to the shoreline ecosystem.132 Therefore, the Harvey Cedars decision resulted in a loss of compensation to the Karans from $375,000 to $1. 133 This minimal compensation award makes it much easier for the town to build the dunes, but ignores the environmental impact.134 If the outcome had been in
125. See Harvey Cedars, 70 A.3d at 529 (“Without the dune project, the Karans’ property had only a 27% chance of surviving fifty years without any storm damage.”). 126. Id. at 541. 127. See id. at 533 (discussing the Court’s calculations). 128. See Samuelson, supra note 16 (discussing the Court’s rejection of the jury award). 129. See id. (“The decision will likely decrease the amount of compensation awarded to homeowners for use of their land for beach replenishment projects in the future, to the relief of shore municipalities considering the use of eminent domain against homeowners who are reluctant to allow dune construction on their property.”). 130. See id. (“If the court had sided with the Karans, many proponents of dune construction worried that projects would become prohibitively expensive.”). 131. See Byrne, supra note 6, at 93 (defining soft armoring). 132. See id. (discussing the negative effects of soft armoring as compared with hard armoring). 133. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 531–32 (reducing calculation of trial court award from $375,000 to $1). 134. See Samuelson, supra note 16 (discussing the benefit to towns of reduced jury award).
BEACH RECONSTRUCTION 529 favor of the Karans, it is likely several towns, like Harvey Cedars, would be unable to afford these reconstruction projects and it would be inevitable that the town and oceanfront property would suffer severe physical and financial damage.135
IV. Why Harvey Cedars Should Not Be Universally Applied
The Harvey Cedars decision raised the question of “who should pay” in beach reconstruction cases: the town or the individual. The New Jersey Supreme Court answer to that question resulted in a shift in property law that required beachfront property owners to bear a substantial cost of protecting the whole beach, while at the same time making it much easier for state to implement their desired protection methods.136 The New Jersey Supreme Court failed to address the issue that by altering traditional common law property rights, such as the amount received for just compensation, it is now easier for states to implement protective projects that have increasingly been found to cause environmental damage.137 Thus, the reduction in property rights comes at a greater cost than originally thought. This decision fails to take into consideration other factors, focusing instead on finding a “quick fix” to the problem of rising sea levels and beach erosion.138 The public has developed an unrealistic expectation that beaches will always remain where they are and in the condition they are currently in and in efforts to maintain their beaches, society has often overlooked the damage that is actually being caused by structures that are supposed to be protective.139
A. Environmental Concerns
135. See id. (explaining the prohibitive cost of upholding the jury award). 136. See Harvey Cedars, 70 A.3d at 527 (discussing holding that shifts the financial burden to homeowners). 137. See Cardiff, supra note 59, at 271–72 (summarizing case law that allowed for state construction of protective projects). 138. See id. at 256–57 (explaining the environmental impacts generally not considered when implementing beach projects). 139. See id. at 277 (discussing how, furthermore, the public may not even realize that degradation is occurring).
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In the United States, sea walls and other forms of armoring have been a popular response to the problems brought on by climate change.140 If the compensation calculation employed in the Harvey Cedars decision is adopted nationally, states will quickly move forward with beach protection projects because they will be able to implement these projects at a much lower cost.141 The problem then presented is that “as more and more of the nation’s bays and estuaries are armored, the American public is losing important habitat, ecosystem services, and the tradition of public access to the shoreline.”142 It has been said that: “seawalls damage virtually every beach they are built on. If they are built on eroding beaches—and they are rarely built anywhere else— they eventually destroy the beach.”143
1. Beach Erosion
Shoreline armoring has the potential to permanently alter the dynamic of the coastline.144 This erosion control method has been found to have numerous unintended and destructive environmental effects.145 In fact, sea walls do nothing to limit beach erosion, and instead actually increase the rate at which beaches erode.146 Construction of sea walls, or other armoring methods, results in the loss of beaches between the seawall and the shoreline.147 Specifically, “[h]ard armoring will eliminate the intertidal area as seas rise, and it often increases erosion of neighboring properties by increasing current and wave action
140. See Black, supra note 4, at 375 (stating that the United States has historically responded to coastal erosion problems by building sea walls). 141. See Harvey Cedars, 70 A.3d at 527 (explaining a compensation calculation where the homeowner bears the financial burden). 142. Pace, supra note 44, at 328. 143. Cardiff, supra note 59, at 255. 144. See Pace, supra note 44, at 338 (“This popular erosion control tool, however, is forever altering the dynamic of the nation’s coastline.”). 145. See id. at 338 (discussing the unintended environmental impact shoreline armoring has on beaches). 146. See id. at 375 (“Although sea walls may be effective at protecting the building directly behind them, they do nothing to limit beach erosion and are generally understood to actually increase the rate of erosion.”). 147. See Pace, supra note 44, at 337 (“As is well understood by coastal engineers, constructing a seawall along a receding shoreline will result in the loss of the sandy beach between the seawall and the water’s edge.”).
BEACH RECONSTRUCTION 531 laterally against unprotected shoreline.” 148 Soft armoring has been found to cause less significant environmental damage, but it may not be able to preserve ecological functions performed by natural shorelines.149 In a sense, shoreline armoring only truly benefits a small minority of property owners, while it decreases access to the millions of people wishing to use the beach recreationally.150 Shoreline armoring causes both passive erosion and active erosion.151 Passive erosion is the narrowing of the part of the beach located in front of the seawall due to the fact that the seawall fixes in place at the back end of the beach, preventing the retreat of the shoreline, while the lower portion of the beach continues to erode.152 Active erosion, on the other hand, is “sand loss caused by waves rebounding off of the seawalls themselves and scouring away the sand.”153 Therefore, in attempts to protect the oceanfront property, towns are actually further harming the beach by increasing erosion.
2. Loss of Habitats
Even without considering the damage done to animal habitats by building some of these protective structures, endangered species are already at risk due to rising sea levels.154
148. Byrne, supra note 6, at 87. 149. See id. at 87 (comparing the environmental impacts of both hard and soft armoring). 150. See Cardiff, supra note 59, at 256 (“Shoreline armoring only benefits the incredibly small minority of the population that owns property directly on the coast, while it decreases access to the millions of people who flock to the beach every year.”). 151. See Cardiff, supra note 59, at 258 (discussing the main ways in which shoreline armoring destroys beaches, namely occupation loss, active erosion, and passive erosion). 152. See id. at 258 (defining passive erosion). 153. Id. 154. See Center for Biological Diversity, Deadly Waters; How Rising Seas Threaten 23 Endangered Species (Dec. 2013), available at http://www.biologicaldiversity.org/campaigns/sea- level_rise/pdfs/SeaLevelRiseReport_2013_print.pdf (discussing the threat rising sea levels bring to endangered species) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT).
532 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
As beaches disappear, so do the habitats located on them.155 The United States is home to 1,383 threatened and endangered species, a disproportionate number of which rely on coastal habitats.156 As sea levels rise, seventeen percent of the nation’s endangered animals will face increasing environmental pressures. 157 Rising sea levels will harm these species by submerging and eroding their habitats. 158 Additionally, groundwater habitats will be contaminated by saltwater intrusion, resulting in the die-off and conversion of plant communities.159 The traditional approach of armoring the shoreline causes a serious loss of those habitats and ecosystems as well.160 For example, certain beach restoration projects replace eroded sands with new sand that differs in the nature and quality. 161 This “new” sand deprives animals of critical qualities they relied on in the natural sand.162 It has also been discovered that sea turtles are capable of adapting to the natural erosion of beaches and effects of devastating coastal storms, but have a much harder time acclimating to human-caused changes in the beach sand.163 The continued use of armoring will result in the loss of numerous
155. See Caldwell, supra note 57, at 540 (“As the beaches vanish, so does habitat for wildlife . . . .”). 156. See Center for Biological Diversity, supra note 154 (discussing how endangered species are affected by changes to the coastline). 157. See id. (discussing the effect of sea-level rise in the United States on threatened and endangered species). 158. See id. (noting the deleterious effect of rising sea-levels on certain endangered species). 159. See id. (identifying some of the damage that will be done to animal habitats by rising sea levels). 160. See Pace, supra note 44, at 329 (“Traditional approaches to defend or armor the shoreline against the rising sea do not take into account loss of estuarine habitat and ecosystem services provided by wetlands.”). 161. See Craig Anthony Arnold, Legal Castles in the Sand: The Evolution of Property Law, Culture, and Ecology in Coastal Lands, 61 SYRACUSE L. REV. 999, 1018 (2010) (discussing some of the problems associated with some beach restoration projects). 162. See Arnold, supra note 161, at 1018 (discussing the impact on sea turtle habitats). 163. See id. (“While sea turtles naturally adapted to the natural erosion of beaches, effects of hurricanes and storms on beaches, and landward migration of coastlines, they have a much harder time adapting to human- caused alterations of beaches . . . .”).
BEACH RECONSTRUCTION 533 near-shore species, as well as diminish diversity among those that remain.164
3. Expensive and Temporary
Armoring is extremely costly. 165 It is economically unfeasible to protect entire coasts through armoring.166 Often, the costs of maintaining the sea wall over time are considerably more than the value of the property the sea wall is attempting to protect.167 An important factor to consider when evaluating these projects is the fact that these protective measures are temporary.168 In fact, the increase in the beach width may only last one season.169 In essence, shoreline armoring “fixes” the back of the beach, which then stops natural shoreline erosion.170 Thus, the beach is unable to migrate inwards as the sea level rises.171 The destructive impact of this process is that the sea level continues to rise, covering the existing beach, and the process prevents new beaches from being created.172
V. More Equitable Solution: Multi-Factor Balancing Test
If courts continue to follow the traditional calculation of just compensation, most beach protection projects will be too
164. See Pace, supra note 44, at 339 (“Bulkheads eventually eliminate all intertidal habitat and significantly reduce both the abundance and diversity of many near-shore species.”). 165. See id. (discussing the negative effects of armoring). 166. See Byrne, supra note 6, at 87 (“Plainly, armoring the entire coast will never be economically feasible or even rational.”). 167. See Black, supra note 4, at 375 (discussing the financial costs of shoreline armoring). 168. See Cardiff, supra note 59, at 256 (stating that these methods only increase the width of the beach for a very short period of time). 169. See Cardiff, supra note 59, at 259 (discussing the temporary benefits of beach replenishment). 170. See Caldwell, supra note 57, at 540 (“Armoring fixes the back of the beach, stopping natural shoreline erosion that would otherwise cause beaches to migrate inland as the water rises.”). 171. See id. (“Armoring fixes the back of the beach, stopping natural shoreline erosion that would otherwise cause beaches to migrate inland as the water rises.”). 172. See id. (discussing the effects of passive erosion on the beaches and shorelines).
534 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) expensive to implement and many property owners will suffer extreme damage to their property or lose the beaches altogether. 173 “The drafters of the Fifth Amendment did not intend to protect private property owners from climate change and its effects.” 174 The climate change and environmental concerns today were unimaginable at the time the Takings Clause was drafted.175 Simply because the large-scale effects of climate change were not threatening society when the Fifth Amendment was ratified does not mean that the takings clause should not address these new concerns. 176 “[T]he protections provided by the takings clause . . . should be carefully reexamined when technological or societal change recasts the nature of the right, freedom, or liberty that is protected.”177 When deciding between calculating just compensation the traditional way (i.e. only considering special benefits, thus making beach reconstruction more expensive/impractical for the states) or the Harvey Cedars way (i.e. considering both special and general benefits, thus reducing traditional property rights and increasing the long-term harm to the environment, but allowing states to easily implement a much needed protective structure), courts should refrain from adopting one set approach. Instead, courts should apply a multi-factor balancing test. As shown above, this threat of rising sea levels and disastrous coastal storms creates a dispute between property rights and protection of the environment. 178 In cases such as
173. See Hiatt, supra note 78, at 384 (identifying the financial issues associated with government taking of private lands due to rising sea levels and erosion). 174. See Hiatt, supra note 78, at 386 (discussing the discrepancy in scientific knowledge between 1791 and present day, and how that difference should affect the interpretation of the drafters’ intent). 175. See id. (“It would likely have been inconceivable to the drafters of the takings clause that thousands of square miles of American land and private property would become submerged by the ocean because human activity altered the Earth’s climate and caused sea level rise to then unfathomable levels.”). 176. See id. (stating that the takings clause should still provide protection against governmental takings whose causes were unanticipated at the time it was ratified). 177. Id. 178. See Hiatt, supra note 78, at 386 (discussing the dichotomy between private property interests and broader environmental concerns).
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Harvey Cedars, where the courts modify the common law application of just compensation, 179 it becomes easier to implement protective measures, such as armoring, that often cause greater long-term harm to the environment.180 On the other hand, if the New Jersey Supreme Court had followed the traditional approach in Harvey Cedars, holding instead that the protective function of the dune to the Karans’ property should not be considered in calculating compensation, it becomes significantly more expensive and therefore unfeasible to build these structures. This method, however, avoids any detrimental impact those structures would have on the environment.181 The problems associated with rising sea levels and disastrous storms are predicted to greatly increase over the years182 and thus, a proper balance must be found between when it is appropriate to reduce traditional property rights at the risk of harming the environment further, and respecting traditional property rights at the risk of not being able to build the protective structures. It is illogical to conclude that decisions that decrease property rights, as was the case in Harvey Cedars, should never be adopted simply because of environmental concerns. If this were the case, the government would be left in some instances with few options to help oceanfront properties, exposing property owners to great loss.183 One cannot ignore, however, that many of these protections dramatically increase the harm done to our environment.184 Both factors need to be taken into consideration when deciding if it is appropriate for the government to decrease
179. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 544 (NJ. 2013) (holding that calculation of just compensation was required to include benefit that homeowners obtained as a result of storm protection provided by dune). 180. See Thomas Ruppert, Reasonable Investment-Backed Expectations: Should Notice of Rising Seas Lead to Falling Expectations For Coastal Property Purchasers?, 26 J. LAND USE & ENVTL. LAW 239 (discussing the current trend of rising sea levels). 181. See Pace, supra note 44, at 338 (discussing the unintended environmental impact shoreline armoring has on beaches). 182. See Caldwell, supra note 57, at 329 (“Sea level is rising and the rate of this rise is increasing.”). 183. See Pace, supra note 44, at 336 (discussing financial impact of deteriorating shoreline on property owners). 184. See id. (discussing the negative effects of some coastal projects).
536 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) or reduce compensation in a takings case in order to build a potentially environmentally destructive structure to ensure protection to the community and beachfront homeowners.185 To adequately determine this, courts should adopt a multi-factor balancing test to weight the property concerns with the environment issues. Courts should first look to see if denial of the protective measure could cause a likelihood of imminent threat to the waterfront property. If this is the case, then courts should adopt as a general rule the Harvey Cedars holding and include general benefits in the calculation of just compensation. If, however, there is no likelihood of imminent threat, courts should apply a multi-factor balancing test. This would include the following two steps: determining if more environmentally friendly alternatives are available and determining if the costs can be justified.
A. Will denial of this protective measure cause imminent, rapid, or sudden loss of property?
In cases where the property owner will risk imminent, rapid, or sudden loss of their property without the protective structures, the court may be justified in following the Harvey Cedars approach to calculating just compensation. Without doing so, the property owner will inevitably lose their property or experience such severe damage that it will be substantially reduced in value.186 Thus, it makes sense to reduce compensation in cases that require quick state action to protect oceanfront property. In Hach v. Zoning Bd. Of Appeals, the petitioner was an owner of a “beachfront home in East Hampton.” 187 Petitioner, Hach, sought a natural resources special permit from the respondent, the Zoning Board of Appeals of the Town of East Hampton (ZBA), to construct a rock revetment measuring 247 feet in length, 42 feet in width, and 14 feet in height parallel to
185. See id. (identifying factors that must be taken into consideration when policymaking). 186. See Harvey Cedars, 70 A.3d 524, 526 (2013) (discussing the necessity of government involvement to preserve value of the property). 187. Hach v. Zoning Bd. of Appeals, 287 A.D.2d 500, 500 (2001).
BEACH RECONSTRUCTION 537 the waterline on his land.188 Hach believed a rock revetment was needed in order to protect his oceanfront property and home from the effects of natural coastal erosion and to generally protect his home from storm surge damage.189 Prior to requesting permission to build a rock revetment, petitioner had spent approximately $40,000 on soft armoring solutions that proved to be insufficient to provide relief after they were destroyed by storms. 190 Petitioner, along with experts, believed this permanent rock revetment was essential in protecting his home.191 The ZBA denied Hach’s request for a natural resources special permit, expressing concern that if Hach did not maintain this revetment, the beach erosion would only worsen.192 The ZBA did, however, acknowledge that the revetment would efficiently protect his property.193 The Appellate Division found the ZBA’s decision was arbitrary and capricious and unsupported by substantial evidence.194 The Court relied on the East Hampton Town Code § 255-5-50(6), which states that in order to obtain a natural resource permit, the petitioner is required to demonstrate that his property was in imminent danger absent a coastal erosion structure and that the proposed structure is the minimum necessary to control erosion.195 The Court found that petitioner had clearly demonstrated his property was in imminent danger absent a coastal erosion structure by the fact that the ZBA had approved all his neighboring properties for
188. See id. (describing petitioner’s revetment). 189. See id. (discussing petitioner’s reasoning for requesting the natural resources special permit). 190. See id. (“The petitioner has expended approximately $40,000 in years past on so called ‘soft solutions,’ which consisted of additions of sand alone, but these proved to be insufficient to provide relief as they were washed out by storms.”). 191. See id. (“The petitioner, with corroborative expert evidence, is thus of the opinion that a revetment, a more permanent ‘hard solution’ is essential to prevent his home from being destroyed.”). 192. See id. (discussing the ZBA’s reasoning in its decision to deny the permit). 193. See id. (discussing the ZBA’s decision to deny the permit). 194. See id. at 501 (“This determination was arbitrary and capricious and unsupported by substantial evidence.”). 195. See id. (discussing the East Hampton Town Code requirements for obtaining the permit).
538 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) revetments. 196 The court found this signaled recognition of imminent peril. 197 Further, the petitioner had already spent $40,000 on other protective structures, none of which could adequately protect his property, and all of which had been destroyed by previous storms.198 While this case involves a situation in which the homeowner was seeking permission to build the structure, it illustrates that in cases where the property is in imminent peril, exceptions must be made to protect the house. A town should be able to reduce compensation to implement beach reconstruction projects when it faces imminent danger of losing all oceanfront property. In Allen v. Strough, Susan Allen, fearing a future hurricane or severe storm would damage or destroy her house, applied for permission to construct a “tapered transitional rock armor revetment.”199 Allen wished to build a steel bulkhead that was 310 feet by 28 feet that would call for the placement of approximately 6,000 cubic years of sand over the revetment, and for the planting of beach grass. 200 While deciding whether to grant Allen permission to build this structure, the participants in the hearing questioned what, if anything, could be done to save the homes that were at risk and whether the measures necessary to save such homes may be taken only at an unacceptable cost of destroying the beaches further.201 Out of fear that Allen’s project would have an adverse impact on the public’s right to pass along
196. See id. (stating that the petitioner had clearly met the burden set forth in the East Hampton Town Code §255-5-50(6)). 197. See id. (“[T]he ZBA approved revetments for neighboring properties, signaling a clear recognition of imminent peril.”). 198. See id. (“Furthermore, the petitioner has already spent $40,000 on unsuccessful soft solutions and under the circumstances of this cases there is no rational basis for requiring him to spend more money on a proven ineffective solution.”). 199. See Allen v. Strough, 301 A.D.2d 11, 13 (2002) (“Fearing that a future hurricane or severe storm could damage or destroy her house, Allen applied to the Board for permission to construct a ‘tapered transitional rock armor revetment.’”). 200. See id. at 13 (describing the protective structure Allen wished to construct). 201. See id. at 14 (discussing the deliberation process concerning Allen’s proposal).
BEACH RECONSTRUCTION 539 the beach area, the Board denied her application. 202 Allen appealed and the case eventually reached the New York Appellate Division.203 The Court recognized the ongoing debate over the extent to which these hard structures might increase the rate of erosion and questioned whether the interest by the property owner should yield to the more diffuse interest of the general public in preserving recreational beaches.204 The Court, however, relied on previous cases in which permits such as the one at issue here were authorized for revetments only where denial would make it likely that there would be imminent, rapid, or sudden loss of the property.205 In the previous New York case, Hach, the New York Appellate Division concluded that substantial evidence established that the petitioner’s property was in imminent danger and thus granted the application.206 The Court differentiates this case from Hach, concluding that Allen’s property did not face imminent danger and thus was not in need of the “hard” protective structure at the expense of the beach.207 The issue was also considered by the New York Appellate Division in Poster v. Strough.208 In this case, the Board denied Poster’s application to build a hard protective future, reasoning that this structure would have an adverse impact to both the environment and the rights and resources of the public.209 Poster alleged that since 1998, his property had undergone substantial erosion, that the dune which had stood between the ocean and his house had essentially disappeared, and that the eroded area of the beachfront had come to within “a few feet” of his house, placing it at risk of collapsing.210 As in Allen v. Strough, the Court
202. See id. at 16 (discussing the Board’s decision to deny Allen’s application). 203. See id. at 17 (outlining the procedural posture of the case). 204. See id. at 20 (discussing some of the critical policy issues involved in the decision). 205. See id. (discussing the holding in Hach). 206. See id. at 20 (discussing the reasoning behind the court’s holding in Hach). 207. See id. at 20 (identifying the court’s differentiation between the circumstances in Hach and Allen). 208. See Poster v. Strough, 299 A.D.2d 127, 128 (2002) (dealing with identical issues seen in Hach and Allen). 209. See id. at 129 (discussing the issues in the case). 210. See id. at 130 (illustrating the damage already done to the property by rising sea level and storms).
540 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) held that Poster failed to submit any evidence that damage to his house was imminent, or that alternative methods of avoiding any such potential damage, such as moving the house, were unfeasible.211 He was not permitted to build the structure for lack of the possibility of imminent, sudden, or rapid harm.212 These three cases illustrate that when the property is not in imminent danger, the court should respect the traditional property rights. In these cases, the court should not follow the Harvey Cedars court in including general and specific benefits in compensation calculations. It is true that other factors may play into using this form of calculation. When there is no imminent risk of losing property, however, the court should require other factors before abandoning the traditional calculation method.
B. The Multi-Factor Balancing Test
1. Are There Other More Environmentally Friendly Alternatives That Can Easily Be Implemented?
While traditional beach protective structures may seem to be the most effective and efficient way to protect property, there are other options that cause substantially less environmental damage and may require fewer invasions into one’s property rights. Retreat, dewatering, living shorelines, and re-vegetating present viable alternatives to sea walls and other harmful structures.
A. Retreat
Retreat is a protection method used to avoid natural hazards by withdrawing from the shoreline.213 It requires relocation of infrastructure further inland when it is positioned in hazardous
211. See id. at 143 (discussing the court’s reasoning in denying Poster’s request). 212. See id. at 143 (discussing the court’s final ruling). 213. See Martin Randall, Coastal Development Run Amuck: A Policy of Retreat May Be The Only Hope, 18 J. ENVTL. L. & LITIG. 145, 168 (2004) (“Retreat is the avoidance of natural hazards through the withdrawal from the shoreline in lieu of protection.”).
BEACH RECONSTRUCTION 541 areas of the coast.214 The absence of building and developing on the shoreline would greatly reduce the harm suffered to property as a result of coastal storms.215 By preventing development in areas with high risk of coastal damage, retreat will reduce public costs of defending and responding to this crisis, in addition to permitting natural landscape features by providing “valuable ecological services to migrate landward.” 216 The most effective way to implement a retreat method is to combine direct regulation with financial incentives. 217 For example, property owners could be mandated to move inland and given tax incentives for relocation to lower risk areas. 218 This solution avoids the problems associated with a single course of action such as using eminent domain to condemn property.219 Retreat can be extremely expensive.220 The government has three options with regard to effectuating retreat: (1) purchase undeveloped coastal land; (2) forbid development of privately owned land; or (3) prohibit the reconstruction of structures destroyed by storms or erosion.221 Any of these three actions can cost a state an extensive amount of money in either acquisition or legal fees.222 Therefore, when considering if a retreat is the most viable method, governments should compare the costs of protecting the buildings and property on the shoreline to the costs of the actual retreat, such as the costs associated with relocating structures and acquiring property. In cases where factors exist such as: investment in structures is low, relatively inexpensive
214. See Pace, supra note 44, at 334 (“A retreat approach to sea level rise necessitates relocation of costly infrastructure further inland . . . .”). 215. See Randall, supra note 213, at 168 (discussing the benefits and disadvantages of retreat). 216. Byrne, supra note 6, at 96. 217. See Black, supra note 4, at 376 (pontificating on the merits of retreat). 218. See id. (discussing the most successful examples of mandated retreat). 219. See id. (discussing the methods used in successful mandated retreat). 220. See Randall, supra note 215, at 168 (discussing the benefits and disadvantages of retreat). 221. See id. (stating the three actions a government must take to implement a retreat method). 222. See id. (further discussing actions a government must take to implement a retreat method).
542 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) land is available nearby, regulations explicitly prevent erosion control structures and favor or require relocation, there is a low density of development, retreat may be an acceptable and effective option. 223 Overall, the environmental and economic arguments for retreat in areas of rising sea level and areas prone to coastal storms are compelling, at least in areas not intensely developed. 224 Unfortunately, retreat is often seen as the more feasible option after a disaster actually occurs.225
B. Dewatering Projects
Dewatering systems present a cost-effective, environmentally friendly, and sustainable solution to beach erosion.226 Dewatering projects are said to be a reliable solution to insufficient beach drainage.227 When the tide comes in, the beach fills with water, and as the tide goes out, the beach drains.228 A beach typically drains slower than the receding tide, which results in a saturated beach during a falling tide, which is more prone to erosion. 229 Over time, better draining can result in reduced erosion and better deposition of sand.230 Gradually, the beach will grow wider, higher, and provide better protection against coastal storms. 231 Dewatering projects are designed to increase a beach’s ability to drain, allowing beaches to drain
223. See id. at 215, at 169 (discussing the viability of retreat and circumstances under which it is most reasonable). 224. See Byrne, supra note 6, at 96 (“The environmental and economic arguments for retreat before sea-level rise are compelling, at least for many coastal areas not intensely developed.”). 225. See Black, supra note 4, at 376 (“Unfortunately, mandated retreat becomes more politically feasible in the wake of a disaster.”). 226. See BMT Designers and Planners, Inc., Coastal Erosion Mitigation, BMT DESIGNERS & PLANNERS, available at http://www.dandp.com/media/4583393/BMT%20D&P%20Coastal%20Erosion%2 0Mitigation.pdf (describing dewater as an alternative) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 227. See id. (“[D]esigned to enhance a beach’s ability to drain and can be used on natural beaches and in conjunction with beach replenishment projects. The passive dewatering system is not detectable by the beach visitor and does not adversely affect habitat critical to coastal wildlife . . . .”). 228. See id. (describing how dewatering projects operate). 229. See id. (describing the dewatering process). 230. See id. (discussing the results of better draining). 231. See id. (describing how dewatering projects operate).
BEACH RECONSTRUCTION 543 more rapidly than those without the system.232 The system works by removing excess water.233 This system would not be noticeable to the public and it does not have a negative impact on coastal wildlife’s habitats.234
B. Living Shorelines
Shoreline armoring does little to protect coastal areas in the long-run, and instead have immense destructive impacts on coastal areas.235 An emerging approach to protect shorelines is the use of “living shorelines.”236 This approach is seen as a more “natural” defense approach when compared with traditional techniques.237 Living shorelines have been described as “a suit of bank stabilization and habitat restoration techniques to reinforce the shoreline, minimize coastal erosion, and maintain coastal processes while protecting, restoring, enhancing, and creating natural habitat.”238 Living shorelines use plants, sand, and rocks to provide shoreline protection, at the same time maintaining coastal wildlife habitats.239 “Living shoreline projects utilize a variety of structural and organic materials, such as wetland plants, submerged aquatic vegetation, oyster reefs, coir fiber logs, sand fill, and stone.” 240 Living shorelines provide a more practical approach to dealing with erosion by controlling erosion, maintaining natural coastal processes, and sustaining
232. See id. (describing the benefits of dewatering projects). 233. See id. (describing how dewatering projects operate). 234. See id. (describing how dewatering projects operate). 235. See Pace, supra note 44, at 340 (“Current popular defense mechanisms do little to protect wetland areas and, in the case of armoring, may actually lead to the destruction of existing wetland areas along the coastline.”). 236. Id. 237. National Oceanic and Atmospheric Administration, Living Shorelines, NOAA HABITAT CONSERVATION, http://www.habitat.noaa.gov/restoration/techniques/livingshorelines.html [hereinafter NOAA] (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 238. See Pace, supra note 44, at 340 (explaining the theory behind living shorelines.). 239. See NOAA, supra note 241 (discussing how to implement the living shoreline methods). 240. Id.
544 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) biodiversity.241 Another beneficial aspect of living shorelines is the fact that this method is usually more economical than hard armoring and requires less maintenance in the long-run.242
D. Re-Vegetation
Re-vegetation is a lost-cost, simple shoreline protection method that can be implemented by the landowner. 243 It is important to note that it can only be used in cases of lawns or bare shorelines with low to moderate erosion. 244 Re-vegetation involves re-planting native vegetation that naturally stabilizes the shoreline.245 The plant’s deep roots help protect the shoreline from erosion by tightly binding the earth below.246
2. Can the Costs be Justified?
There are certain situations that require courts to reduce the amount of compensation awarded in beach reconstruction takings cases because the damage that would be caused otherwise outweighs any concerns over reduced compensation. The two main situations in which this may be the case are in urban settings and areas that rely on tourism for their main source of income.
A. Urban Areas
241. See Pace, supra note 44, at 340 (discussing the benefits of living shorelines over hard armoring). 242. See id. (“Additionally, some studies suggest that construction and maintenance of living shorelines is more economical than armoring with hard structures and also requires less maintenance over time.”). 243. See Department of Environmental Conservation, Shoreline Stabilization Techniques (July 2010), available at http://www.dec.ny.gov/docs/permits_ej_operations_pdf/stabiltechguid.pdf introducing “softer” shoreline protection methods) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 244. See id. (“Re-vegetation works in the case of lawns or bare shorelines with low to moderate erosion.”). 245. See id. (describing re-vegetation methodology). 246. See id. (“The deep roots of these plants bind the earth below tightly, effectively protecting your shoreline from erosion.”).
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Two-thirds of the world’s cities that have populations over five million are located in areas that have been deemed to be “high risk” areas for flooding.247 In certain urban settings, sea walls are the best erosion control device. 248 Often, there are minimal protective options cities can implement due to the specific characteristics of a city, attributable to existing shoreline development, or in densely populated cities such as New York, to the value of the property being protected.249 The value of this property often outweighs the cost of constructing and maintaining the seawall, thus making it the better economical choice.250 Retreating is not a reasonable option in big cities.251 It is impractical for a large city to stop development or buy up all the property in danger of flooding.252 Additionally, many large cities anticipate continuous growth over the next few decades making it impossible to stop development.253 For example, New York anticipates another million residents over the next two decades.254 As Rafael Pelli, a Manhattan architect who serves on a climate-change committee that advises the New York Department of City Planning, stated, “If you have to relocate
247. See Consequences of Climate Change on the Oceans, CLIMATE INSTITUTE, http://www.climate.org/topics/sea-level/index.html (“[T]wo-thirds of the world’s cities that have populations over five million are located in these at- risk areas.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 248. See Black, supra note 4, at 375 (discussing sea walls as potentially the only alternative in urban areas). 249. See id. (“The lack of feasible options may be attributed to existing shoreline development or, in densely populated cities such as London or New York, to the value of protected property outweighing the costs of constructing and maintaining a sea wall.”). 250. See id. (discussing the comparative viability of sea walls in urban areas). 251. See Mireya Navarro, New York is Lagging as Seas and Risks Rise, Critics Warn, N.Y. TIMES, Sept. 10, 2012, available at http://www.nytimes.com/2012/09/11/nyregion/new-york-faces-rising-seas-and- slow-city-action.html?pagewanted=all&_r=0 (explaining why big cities cannot use retreat as a method for dealing with climate change) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 252. See id. (“Curbing development or buying up property in flood plains . . . is too impractical here.”). 253. See id. (discussing the growth of big cities). 254. See id. (“[T]he city anticipates another million residents over the next two decades.”).
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10,000 people, how do you do that?”255 Additionally, in cities, such as Manhattan, there is no beach therefore the environmental concern is not present and economic concerns can take priority.256 It is extremely expensive for cities to construct sea walls. 257 If cities are forced to compensate homeowners the traditional way, several cities simply will not be able to afford providing this protection. For example, New York City plans on spending over $2 billion on these projects in the next eighteen years.258 It fact, it has been estimated that installing barriers for New York will cost $10 billion.259 If the city does not find a way to make constructing these sea walls less expensive, the city will be billions of dollars short of armoring itself.260 Another example of a city in trouble is Boston. Over the next century, damage in Boston could exceed $20 billion, depending on the cities response to rising sea levels.261 Cities unable to build these protective structures city could face financial devastation beyond what is expected in smaller towns.262 For example, potential flooding in New York could paralyze transportation, cripple the low-lying financial district, and temporarily drive hundreds of thousands of people from their home. 263 Additionally, residents of cities with large industrial waterfronts with chemical-manufacturing plants, oil- storage sites, or garbage-transfer stations face serious safety
255. Id. 256. See id. (explaining that the lack of beaches reduces erosion concern). 257. See id. (discussing the costs of building sea walls in cities). 258. See id. (“Overall, the city is hoping to funnel more than $2 bullion of public and private money to such environmental projects over the next 18 years . . . .”). 259. See id. (discussing what the cost would be to protect New York City from climate change). 260. See id. (discussing the consequences of not altering sea wall construction methods). 261. See Craig LeMoult, Tufts Civil Engineer Predicts Boston’s Rising Sea Levels Could Cause Billions Of Dollars In Damage (Feb. 16, 2013), available at http://www.eurekalert.org/pub_releases/2003-02/tu-tce021403.php (discussing the effects of climate change on Boston) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 262. See Navarro, supra note 251 (discussing the financial impact of climate change on New York City). 263. See id. (elaborating on climate change and the economy).
BEACH RECONSTRUCTION 547 risks if the city is not protected from storm. 264 Sea walls are required in these areas to prevent contamination from the hazardous materials.265 It is impossible to fully insulate a city from environmental harms, but implementing a more costly method of building sea walls, and reducing the amount homeowners receive for just compensation, will provide cities with a chance to protect its residents and property.
B. Tourism
In certain areas, beaches are vital to the state’s economy. 266 Eighty-five percent of all United States tourism revenues occur in coastal states.267 If those states are unable to afford building beach protective structures, the state could face losing a substantial amount of money.268 Tourism infrastructure will be heavily damaged, resulting in local economic depressions for communities that depend heavily on the industry. 269 For example, California generates fourteen billion tourism dollars per year. 270 From an economic viewpoint, California’s beaches are considerable more important to the overall economy than the property being protected.271 If California is unable to afford beach protection due to the high landowner compensation costs, the state will lose a substantial portion of its tourism industry and
264. See id. (stating the environmental concerns for areas like the South Bronx which have large industrial waterfronts). 265. See id. (concluding that sea walls are required on large industrial waterfronts). 266. See Arnold, supra note 161, at 1018 (“Coastal areas are highly popular places to live and visit. Over half of the U.S. population lives in coastal areas, even though coastal areas constitute only seventeen percent of the total area in the contiguous forty-eight states.”). 267. See id. at 1019 (“[E]ighty-five percent of all U.S. tourism revenues occur in coastal states.”). 268. See id. at 1019–20 (listing the cultural impact these tourist areas have and how reliant they are on tourism). 269. See Byrne, supra note 6, at 79 (“Tourism infrastructure will also be heavily damaged, resulting in local economic depressions for communities that depend heavily on the industry.”). 270. See Cardiff, supra note 59, at 256 (discussing the impact on California). 271. See id. (discussing the impact on California).
548 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) associated revenue.272 The Pacific Ocean is estimated to rise 55 inches by 2100, causing Venice Beach to lose up to and estimated $440 million in tourism and tax revenue.273 It is expected Zuma Beach and Broad Beach in Malibu will experience a drop in visitors, costing Malibu nearly $500 million in revenue.274 Certain states have adopted legislation addressing this issue. South Carolina's legislature found that the dune system along its coast was “extremely important” to the state as “a storm barrier” contributing to “shoreline stability,” by “generating approximately two-thirds of the state's annual tourism industry revenue.”275 Furthermore, “Florida adopted the Beach and Shore Preservation Act . . . in 1961.”276 This Act declared beach erosion “a serious menace to the economy and general welfare of the people.” Florida’s legislative response to widespread beach erosion was to pronounce it a “necessary governmental responsibility to properly manage and protect Florida beaches” and to “make provision for beach restoration and nourishment projects.”277 Florida declared that the funding of the state's beach management plan is justified by the legislative finding that erosion of the beaches is detrimental to tourism.278 It is important to note here that in the context or armoring cities, soft armoring should be used over hard armoring.279 Long-
272. See id. at 281 (“It is impossible to ignore the fact that 150 miles of seawalls is, at the very least, having a disastrous cumulative impact on . . . recreational beach. Yet, the emotional appeals of homeowners are also impossible to ignore. Ultimately, compromise is not possible.”). 273. See Tony Barboza, Rising Sea Levels Could Take Financial Toll on California Beaches, LOS ANGELES TIMES (Sept. 13, 2011), available at http://latimesblogs.latimes.com/greenspace/2011/09/rising-sea-levels-could-take- financial-toll-on-california-beaches.html (“Venice Beach could lose up to $440 million in tourism and tax revenue if the Pacific Ocean rises 55 inches by 2100 as scientists predict, according the study commissioned by the California Department of Boating and Waterways.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 274. See id. (“A drop in visitors to an eroded Zuma Beach and Broad Beach in Malibu would cost nearly $500 million in revenue . . . .”). 275. Caldwell, supra note 57, at 573. 276. Nolon, supra note 40, at 744. 277. Id. at 744–45. 278. See id. at 744–45 (elaborating on Florida’s legislative response). 279. See Byrne, supra note 6, at 87 (stating that soft armoring is better environmentally for the beaches).
BEACH RECONSTRUCTION 549 term effects of hard armoring consist of loss of the sandy beach between the seawall and the water’s edge. 280 Soft armoring causes less environmental damage to the beach because it mimics natural shorelines.281 In order to preserve the beach in its most natural form, states should use soft armoring techniques such as dune replenishment.282
C. Applying the Multi-Factor Balancing Test to Harvey Cedars
It is not disputed that without the dune-construction project, the Karans and other shoreline homeowners could experience substantial damage to their property if a storm occurred in the future. 283 The Borough of Harvey Cedars presented expert testimony from Randall A. Wise of the Army Corps of Engineers, a civil engineer specializing in coastal engineering.284 Wise stated that over a thirty-year period, without the dune-construction project there was a 56% chance a storm could completely damage the Karans’ shoreline home. 285 The expert testimony focused on the long-term damage, concluding that the Karans would likely suffer damage within thirty years.286 It is questionable whether it was necessary to drastically reduce compensation awarded to the Karans because no testimony was provided that the dune was needed immediately or that Harvey Cedars would be unable to build the dune if the Court followed the traditional approach to calculating just compensation. 287 Rather, Harvey Karan testified that his home was built in 1973
280. See Pace, supra note 44, at 337 (discussing the negative implications of utilizing hard armoring). 281. See Byrne, supra note 6, at 87 (“Soft armoring causes less environmental harm because it mimics natural shorelines . . . .”). 282. See id. (discussing soft armoring techniques). 283. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 529 (discussing the expert testimony concerning the damage that would result to shoreline properties without a dune-construction project). 284. See id. (introducing Wise as an expert). 285. See id. (discussing the findings of the expert testimony). 286. See id. (“[T]he court concluded that the financial benefits of the beach-replenishment and storm-protection project were shared . . . by the larger community of Harvey Cedars and therefore were general benefits.”). 287. See id. (“Without the dune project, the Karans' property had only a 27% chance of surviving fifty years without any storm damage.”).
550 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) and since that time he had not a “lick of water” invade the living quarters of his home.288 Without the likelihood of an imminent threat to the property, the Court should have applied the multi-factor balancing test. The first step would require the New Jersey Supreme Court to determine if more environmentally friendly alternatives existed. There was no mention in the lower court or in the New Jersey Supreme Court concerning the environmental damages that are associated with the dune-construction project.289 Therefore, it appears that the Court overlooked the fact that the town of Harvey Cedars may have ignored other possible alternatives. If more environmental friendly alternatives exist, a court should be reluctant to alter the traditional property rights of a homeowner to allow a town to implement a project that will provide immediate relief, but long-term damage. The Court should have also considered whether the damage that would be caused without the dune-construction project outweigh the costs of implementing the project. Harvey Cedars is a small, primarily residential, town located along the New Jersey shore with a minimal population.290 Most visitors of Harvey Cedars come to relax in their summer homes.291 In fact, there are no hotels in the town for tourists to stay. 292 The problems mentioned above associated with urban areas and areas that rely on tourism do not apply to Harvey Cedars. This is not to say that the dunes should not be built – there is still a need to protect the shoreline property in Harvey Cedars. Rather, the state interest in protecting this shoreline is less compared to those of urban and tourism areas. Therefore, if the state is to proceed with the dune-construction project, it should follow the traditional calculation of just compensation that has always been used in the past. A town should be required to show additional
288. See id. at 530–31 (discussing Harvey Karan’s testimony). 289. See id. at 529–34 (showing there has not been a discussion concerning potential environmentally negative effects from dune construction). 290. See Harvey Cedars, New Jersey, LONG BEACH ISLAND JOURNAL (last visited Mar. 29, 2015), http://www.longbeachislandjournal.com/communities/harvey-cedars (describing the area discussed in Karans) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 291. See id. (discussing local tourism). 292. See id. (explaining consumer infrastructure).
BEACH RECONSTRUCTION 551 reasons for reducing a homeowner’s property rights, aside from the fact that the project is expensive if the town is to follow the traditional just compensation calculation method.
IV. Conclusion
It has become clear that due to increasing sea levels and more frequent coastal storms, the government may not have any option but to compromise certain traditional property rights in order to protect the towns and communities faced with the dangers associated with these problems. The issue is not as clear as protecting environmental rights before property rights or vice versa. Instead, in order to effectively and efficiently protect both property interests and environmental interest, courts should adopt a multi-factor balancing test. The test should weigh the interests of both property and environmental issues to determine when it is adequate to compromise traditional property rights and which protective measures are permissible.
NECESSARY CHANGE: RE-CALCULATING JUST COMPENSATION FOR ENVIRONMENTAL BENEFITS
Scott Salmon*
Abstract
This Note is about the recent New Jersey Supreme Court case, Borough of Harvey Cedars v. Karan, and how other courts should adopt its holding of allowing all reasonably certain and calculable benefits to be considered in determining partial takings just compensation. Furthermore, it addresses the impact that the decision will have on environmental takings and its importance to the future of both property and environmental law.
Table of Contents
I. Introduction ...... 553 II. History of Eminent Domain ...... 555 III. Calculation of Just Compensation ...... 560 A. Theoretical Conception of Just Compensation ...... 560 B. Value Plus Damage Method ...... 562 C. Before-and-After Method ...... 564 D. Defining Special and General Benefits ...... 566 IV. Impact on Environmental Takings ...... 573 V. Borough of Harvey Cedars v. Karan ...... 576 VI. Proposed Change and Its Effects ...... 582 VII. Arguments and Alternatives ...... 584 VIII. Conclusion ...... 591
* Scott Salmon ([email protected]) is a J.D. candidate at Washington and Lee University School of Law, May 2015, and the Executive Managing Editor of the Journal of Energy, Climate, and the Environment. Scott would like to thank Professor Jill Fraley for advising him on this Note. He would like to thank his parents, Jon and Meryl Salmon, and his sisters, Dr. Barie Salmon, and Dr. Tracy Salmon, for their love and support.
552 NECESSARY CHANGE 553
I. Introduction
“In a partial-takings case, homeowners are entitled to the fair market value of their loss, not to a windfall.1
-Justice Barry T. Albin, Supreme Court of New Jersey
Under the Fifth Amendment to the Constitution of the United States, colloquially known as the Takings Clause, the federal government may take private property for public use through the doctrine of eminent domain, provided that the owner is reimbursed with “just compensation.”2 The calculation of this compensation is generally dictated by statute, which differs by jurisdiction and type of taking.3 Unfortunately, most methods of calculation currently in practice hinder government partial takings for environmental purposes, because the costs are unfairly weighted towards the landowner.4 For example, if the government wishes to use its eminent domain authority to condemn a section of an individual’s property to replenish a beach, build a dam, or raise a windmill, the intangible benefits of the project to the public are generally not considered in calculating the compensation to the landowner.5 As a result of the inability to calculate such benefits, the proposed project may be prohibitively costly for the government with no financial offset for the benefits.6 As the general goal of
1. Borough of Harvey Cedars v. Karan, 70 A.3d 524, 527 (N.J. 2013). 2. See U.S. CONST. amend. V (“[N]or shall private property be taken for public use, without just compensation.”). 3. See RESTATEMENT (THIRD) OF PROP.: SERVITUDES, § 2.18, cmt. h (2000) (“Federal and state constitutions require that the servitude be acquired for some public purpose and that just compensation be paid.”); see also infra Part III for a more detailed discussion of calculation methods. 4. See Harvey Cedars, 70 A.3d at 527 (stating that in a formula used to determine damages of a partial taking, the court did not consider the benefits of that increased the value of the remaining property in a partial taking). 5. See id. at 535–36 (citing prior cases where any benefit to the landowner as a result of he taking is not considered in calculating the amount of compensation due to the landowner). 6. See infra note 218 and accompanying text. [Press release, Jerry Patterson] 554 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) eminent domain compensation serves to make the property owner whole,7 these calculations are by definition focused on benefitting the private individual rather than the condemnor, the public acting through the government.8 The failure of most compensation models to account for general public benefits may make an environmental enterprise impossible for the government if the compensation costs are unreasonably high. 9 This Note argues for modifying partial takings jurisprudence in the mold of the recent New Jersey Supreme Court decision, Borough of Harvey Cedars v. Karan, such that just compensation to private owners would be calculated using the before-and-after method, offset by both reasonably calculable general and special benefits.10 First, this Note will set the stage for the current understanding of takings jurisprudence by discussing the history of eminent domain. 11 Then, this note will go deeper into a discussion of eminent domain and how just compensation is actually calculated in partial takings, by exploring the various methods and manners of calculation.12 It will then look at how these calculations affect environmental takings13 before looking at the specific case of Borough of Harvey Cedars v. Karan.14 The decision forms the basis of the proposed modification to takings jurisprudence that this Note advocates.15 Finally, this Note will
7. See 26 AM. JUR. 2D Eminent Domain § 224 (2014) (“[C]ompensation should be designed to place the owner in a position as good as, but not better than, the position the owner is in before the taking occurs.”). 8. See id. (describing that compensation should reimburse a landowner to the full extent of their loss). 9. See infra note 218 and accompanying text. [Press release, Jerry Patterson]. 10. See Harvey Cedars, 70 A.3d at 526–27 (“We now conclude that when a public project requires the partial taking of property, ‘just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property.”). 11. See infra Part II. 12. See infra Part III. 13. See infra Part IV. 14. See infra Part V. 15. See id. at 384 (holding that the just compensation calculation must include benefits that homeowners obtained from storm protection that a constructed dune provided). NECESSARY CHANGE 555 look at the proposed change and its effects, along with the opinions of both advocates and detractors.16
II. History of Eminent Domain
In 1897, the Supreme Court incorporated the Takings Clause of the Fifth Amendment to the Due Process Clause of the Fourteenth Amendment, 17 which meant that the just compensation requirement of eminent domain applied to the states, in addition to the federal government.18 The Court held in Chicago, Burlington & Quincy Railroad Co. v. City of Chicago that:
[the] judgment of a state court, even if it be authorized by statute, whereby private property is taken for the state or under its direction for public use, without compensation made or secured to the owner, is, upon principle and authority, wanting in the due process of law required by the fourteenth amendment of the constitution [sic] of the United States.19
Chicago involved the taking of land by private individuals, along with the Chicago, Burlington & Quincy Railroad Company for the purpose of widening a road.20 In that instance, the Court awarded a nominal amount of $1 to the condemnees, which they found constituted just compensation. 21 As a result of the Supreme Court’s decision, when a state or a local jurisdiction decides to use their eminent domain authority, they must not only provide the
16. See infra Parts VI and VII. 17. See U.S. CONST. amend. XIV (“[N]or shall any State deprive any person of . . . property, without due process of law.”). 18. See Chicago, Burlington & Quincy R.R. v. Chicago, 166 U.S. 226, 241 (1897) (affirming that the Due Process Clause of the Fourteenth Amendment extends just compensation obligations to the states). 19. Id. 20. See id. at 230 (explaining that the city of Chicago petitioned to the circuit court of Cook county for the condemnation of land for the improvement and sought just compensation for private property taken or damaged). 21. See id. (noting that the jury determined $1 to be just compensation for the railroad company’s portion of the right of way). 556 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) same procedural due process the Fourteenth Amendment requires, but must also provide just compensation, even if the appropriate amount is merely a nominal fee.22 Until 1922, courts interpreted the Takings Clause literally as it was written, so property had to be physically taken for public uses to qualify under the doctrine of eminent domain.23 In Pennsylvania Coal Co. v. Mahon, the Supreme Court expanded the definition of takings by holding that regulation of property beyond a certain point constitutes a regulatory taking and required just compensation.24 In that matter, the Kohler Act prohibited mining that would cause subsidence of homes and surfaces near residential properties.25 The Pennsylvania Coal Company proceeded to mine underneath the homes based on the explicit terms of the deeds to the homes, which only granted the landowners the rights to the surface, and not the ground beneath their land.26 The contractual agreement through the deeds conflicted with the Kohler Act, so the Court found that the statute’s regulatory powers necessarily constituted a taking because they were so restricting upon the Pennsylvania Coal Company’s rights as owner the land beneath the property.27
22. See id. at 247 (stating that the state court has a duty to guard and protect the constitutional right of due process enjoined by the Fourteenth Amendment). 23. See JOSEPH W. SINGER, INTRODUCTION TO PROPERTY 678 (2d ed. 2005) (“Before 1922, the takings clause was interpreted fairly literally. A taking would be found when a state or the federal government exercised its eminent domain power to take property for public uses.”). 24. See Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922) (“The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”). 25. See id. at 416–17 (“The Kohler Act prohibits, under certain conditions, the mining of anthracite coal within the limits of a city in such a manner or to such an extent ‘as to cause the . . . subsidence of . . . any dwelling or other structure used as a human habitation, or any factory, store, or other industrial or mercantile establishment in which human labor is employed.’”) (Brandeis, J., dissenting). 26. See id. at 412 (“The deed conveys the surface but in express terms reserves the right to remove all the coal under the same and the grantee takes the premises with the risk and waives all claim for damages that may arise from mining out the coal.”). 27. See id. at 414 (“It is our opinion that the act cannot be sustained as an exercise of the police power, so far as it affects the mining of
NECESSARY CHANGE 557
As the Court stated, “The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”28 Regulations that essentially deprive landowners of their property rights thus qualify as a regulatory taking.29 After Pennsylvania Coal Co., a taking could be either physical or regulatory, both of which would require just compensation.30 Eminent domain jurisprudence changed significantly again in 1978 with the Supreme Court’s decision in Penn Central Transportation Co. v. New York City, which called for an ad hoc determination of various factors in considering whether or not a regulatory taking has occurred. 31 In this case, the landowner owned Grand Central Terminal and wanted to build a multistory office building on top. 32 However, the terminal had been designated a landmark under New York’s Landmark Preservation Law. 33 The landmark status of the building prevented such construction, so the owner sued, alleging that the restrictive nature of the statute constituted a regulatory taking which demanded just compensation under the Takings Clause.34 coal under streets or cities in places where the right to mine such coal has been reserved.”). 28. See id. at 415. 29. See SINGER, supra note 23, at 680 (“Justice Holmes reasoned [in Pennsylvania Coal] that regulations that deprive owners of the value of their property were as harmful to the legal rights and justified expectations of owners as outright seizure of their land.”). 30. See Pennsylvania Coal, 260 U.S. at 415 (stating that if a regulation goes too far then it is a taking and the constitutional way of paying for the change must be upheld). 31. See SINGER, supra note 23, at 687 (“Instead of a clear rule, the Court engages in ‘essentially ad hoc, factual inquiries’ into the ‘particular circumstances’ of the case . . . .”); see also Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 124 (1978) (“In engaging in these essentially ad hoc, factual inquiries, the Court’s decisions have identified several factors that have particular significance.”). 32. See Penn Central, 438 U.S. at 104 (“[A]ppellant Penn Central entered into a lease with appellant UGP Properties, whereby UGP was to construct a multistory office building over the Terminal.”). 33. See id. (“Under the Landmarks Law, the Grand Central Terminal (Terminal), which is owned by the Penn Central Transportation Co. and its affiliates (Penn Central) was designated a “landmark” and the block it occupies a ‘landmark site.’”). 34. See id. (“[A]ppellants brought suit in state court claiming that the application of the Landmarks Law had “taken” their property without just compensation in violation of the Fifth and Fourteenth Amendments and
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The Court ruled that the ad hoc factors to be considered included the “economic impact of the regulation on the claimant,” and the extent of the government’s regulatory interference, among others.35 As a result, it took a holistic view in considering whether or not a regulatory taking had occurred, and looked at the substance rather than the form of the regulations.36 Although this Note does not focus on regulatory takings, there is currently an enormous amount of discussion about the subject in conjunction with environmental issues relating to land conservation, wetlands management, endangered species, mining, and industrial air pollution, making the subject relevant in a corollary manner.37 The most recent major development in complete takings law came in 2005 with the Supreme Court’s decision in Kelo v. City of New London, in which the Court held that the government may transfer private property to another private party, with proper compensation, and qualify as a legitimate public taking.38 Furthermore, the defining characteristic seemingly emphasized by Justice Stevens was the “public purpose” of the taking: “Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments . . . .”39 Kelo was concerned primarily with complete arbitrarily deprived them of their property without due process of law in violation of the Fourteenth Amendment.”). 35. See id. at 124 (describing the specific significant ad hoc factors of relevant consideration). 36. See id. (acknowledging that the Court has been “unable to develop any ‘set formula’”). 37. See Jennifer Koons, Supreme Court’s Regulatory Takings Case Draws Widespread Interest, N.Y. TIMES (Oct. 6, 2009), http://www.nytimes.com/gwire/2009/10/06/06greenwire-supreme-courts- regulatory-takings-case-draws-w-78107.html (noting the widespread interest from then-Solicitor General Elena Kagan, attorney generals from twenty-six states, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, and others, in Stop the Beach Renourishment v. Florida, a regulatory takings case that involved a plan to create a state-owned public beach between private waterfront land and the Gulf of Mexico) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 38. See Kelo v. City of New London, 545 U.S. 469, 490 (2005) (holding that the city’s exercise of eminent domain power on ground takings met the constitutional “public use” requirement). 39. See id. at 480 (rejecting a narrow test for the universal test to determine public purpose). NECESSARY CHANGE 559 takings, and the specific question has not come before the Supreme Court with regards to partial takings, so it is unclear if the Court would view the public purpose requirement as broadly and necessary as in partial takings. 40 However, the lack of a distinction made in Kelo between types of takings would indicate the requirement would apply similarly to partial takings.41 The only significant federal case addressing partial takings is Bauman v. Ross, which came before the Supreme Court soon after the Chicago, Burlington & Quincy Railroad Co. v. City of Chicago decision in 1897.42 In that matter, the Court dealt with the expansion of Washington, D.C. and the necessity of partially taking property under eminent domain to build the streets of the city. 43 Justice Horace Gray wrote of the constitutionality of partial takings, and that in calculating compensation, for federal purposes, only special benefits may be set off from the compensation award, and not general benefits.44 This distinction is discussed in more detail in Section III, but it fits within the majority view of the subject.45 From the time the Fifth Amendment was ratified in 1791 to the Kelo decision in 2005, courts have changed the accepted
40. See id. at 479 (noting that the public use test was difficult to administer because the definition of public use was unclear on the issue of public purpose). 41. See id. at 480 (reaffirming the broad interpretation of public use as “public purpose”). 42. See Bauman v. Ross, 167 U.S. 548, 561 (1897) (“[A] jury of seven was summoned . . . and the introduction of evidence by the petitioners and by the respondents, rendered a verdict, in the form prescribed by the court, setting forth a description of each parcel of land affected, the number of square feet in the parcel, the number of square feet taken, the number of square feet not taken . . . .”). 43. See id. at 550 (“Congress accordingly, by the act of August 27, 1888 (chapter 916), entitled ‘An act to regulate the subdivision of land within the District of Columbia,’ authorized the commissioners of the District of Columbia to make and publish general orders regulating the platting and subdividing of all lands and grounds in the District . . . .”). 44. See id. at 581–82 (“We, of course, exclude the indirect and general benefits which result to the public as a whole . . . But, if the proposed road or other improvement inure to the direct and special benefit of the individual out of whose property a part is taken, he receives something which none else of the public receive, and it is just that this should be taken into account in determining what is compensation.”). 45. See infra Part III.D (providing a more detailed discussion of special and general benefits). 560 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) interpretation of the Takings Clause in a staggered manner from a literal interpretation to a much more complex tool that can be used for public use and private individuals through varying methods.46
III. Calculation of Just Compensation
A. Theoretical Conception of Just Compensation
When the government takes an entire property either physically or through regulation, the just compensation owed to the condemnee is calculated by a simple appraisal of the property to determine its fair market value, which is then paid to them by the government. 47 For a complete taking, the Takings Clause does not require compensation for anything other than the taken property, not even consequential or future damages. 48 As the Supreme Court said in Boston Chamber of Commerce v. Boston, the Fifth Amendment “merely requires that an owner of property taken should be paid for what is taken from him.”49 However, the simple compensation rule for complete takings does not extend to partial takings, where the government seeks only a section of the privately owned property.50 A typical example would be if the government condemned a strip of land within a larger plot to build a highway.51 This would constitute a
46. See Kelo, 545 U.S. at 483 (noting that public use jurisprudence changed from rigid formulas to favoring an approach giving legislatures broad latitude). 47. See WILLIAM B. STOEBUCK & DALE A. WHITMAN, THE LAW OF PROPERTY 539 (3d ed. 2000) (“In the usual kind of taking case [a complete taking] . . . the remedy is monetary damages . . . measured by the owner’s loss, the fair market value of the land . . . .”). 48. See BARLOW BURKE, ANN M. BURKHART & R.H. HELMHOLZ, FUNDAMENTALS OF PROPERTY LAW 747 (3d ed. 2010) (“For example, the Takings Clause does not require compensation for consequential damages, such as relocation costs.”). 49. Boston Chamber of Commerce v. Boston, 217 U.S. 189, 195 (1910). 50. See 1 LEWIS ORGEL, VALUATION UNDER THE LAW OF EMINENT DOMAIN § 47 (2d ed. 1953) (describing the various scenarios in which a partial taking may be confused with a complete taking). 51. See State ex rel. State Highway Comm’n v. Nickerson, 578 S.W.2d 916 (Mo. 1979) (illustrating an example of a partial taking). NECESSARY CHANGE 561 partial conveyance, whereas the condemning the entire plot of land to construct a nature preserve would be a complete taking.52 Determining the value of a partially taken property brings difficult questions.53 If the piece taken contains the majority of the value of the property, or if the remaining property is worthless without the section that was taken, valuation becomes a balancing test of different factors with no precise answer.54 If a partial taking will increase the value of the remaining property instead of decreasing it, that presents problems because an individual should not be expected to pay the government for the privilege of having their property taken.55 As a result, there are a number of issues facing any calculation that must be addressed in a proposed formula. Although a variety of methods have been postulated,56 as a matter of practice, there are two principal methods of calculating just compensation in partial takings.57 The first method, known as “value plus damage” (“VPD”), calculates the value of the part taken, plus any damages to the remainder. 58 Currently, a majority of jurisdictions use VPD.59 The second method, known as “before-and-after” (“BAA”), takes the difference between the fair market value of the entire property before and after the taking,
52. See Dep’t of Pub. Works & Bldgs. v. Keller, 335 N.E.2d 443, 446 (Ill. 1975) (illustrating such an example as a complete taking). 53. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526–27 (N.J. 2013) (stating that the Court must consider all “relevant, reasonably calculable, and non-conjectural factors” to determine the value of the remaining property). 54. See Dep’t of Transp. v. Gunnels, 340 S.E.2d 12, 15 (Ga. 1986) (“A partial taking (hypothetically, of a narrow strip) might indeed render a remainder, still within the ownership of the condemnee, nearly worthless.”). 55. See United States v. 101.88 Acres of Land, 616 F.2d 762, 769 (5th Cir. 1980) (“If, instead, the taking increases the value of the remainder, the increment in value may be set off against the compensation awarded for the land condemned.”). 56. See ORGEL, supra note 50, § 48 (listing three possible formulae). But see AM. JUR. supra note 7, § 373 (listing four possible formulae). 57. See ORGEL, supra note 50, §§ 50–51 (describing the “value plus damage” method and the “before-and-after” method). 58. See id. § 52 (describing the application of the VPD formula in case law). 59. See id. § 50 (“This formula is perhaps more often used than any other.”); see also AM. JUR., supra note 7, § 324 (“In most states, the condemnee’s compensation for a partial taking is calculated under some variation of the ‘value plus damage’ rule . . . .”). 562 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) minus any benefits to the property as a result.60 Both methods are composed of two steps, which will be discussed in more detail below.
B. Value Plus Damage Method
The finder of fact calculates VPD through two steps.61 The first step requires the valuation of the piece of property taken.62 This usually involves hearing testimony from appraisal experts and other forms of extrinsic evidence. 63 Following the initial valuation, the second step is to add the value of any damages to the remaining part of land, which may be offset by special benefits.64 The valued damages to the remainder of the property are known as “severance damages.”65 Severance damages are broadly defined as “the depreciation in the ‘market value’ (or ‘fair market value’) of the remainder resulting from, or due to, the taking of that portion of the owner’s property that is expropriated.”66 As one court stated, “[s]everance damage in an expropriation case may be defined as a diminution in the value of the landowner's remaining, unexpropriated property.”67 If the government were to condemn part of an individual’s property to take an easement for the construction of a natural gas pipeline and this were to increase the difficulty of developing or selling the remaining land,
60. See ORGEL, supra note 50, § 51 (introducing the basic components of the BAA formula). 61. See AM. JUR., supra note 7, § 324 (“[T]he condemnee should receive compensation equal to the total of: (1) the value of the property actually taken, and (2) any net damages to the property remaining, after offsetting special benefits to the remaining property.”). 62. See id. (listing the first step of calculating under VPD). 63. See id. § 229 (explaining methods used to determine the valuation of the property). 64. See id. § 324 (listing the second step of calculating under VPD); see also infra Part III.D (providing a more detailed discussion of special benefits). 65. See SINGER, supra note 23, at 750 (“The reduction in the value of the remaining [property] is called severance damages.”). 66. ORGEL, supra note 50, § 53. 67. See State Dept. of Transp. and Dev. v. Regard, 567 So. 2d 1174, 1176 (La. Ct. App. 1990). NECESSARY CHANGE 563 the value of these damages will increase the intrinsic value of the taken property as a measure of severance damages.68 Furthermore, “[w]hatever is reasonably certain to follow as an incident to such construction and operation, which in an appreciable degree depreciates the value of the remaining land, is a proper element of damages to be considered by the jury in arriving at its verdict.” 69 Courts have held that severance damages must “proximately arise” as a consequence of the taking.70 There is wide acceptance of the importance that every type of damage may be considered.71 Courts have held that there should be broad admissibility of evidence,72 and that “[a] court may consider all factors indicative of the value of the property, and which would have been present in the minds of a willing buyer and a willing seller.”73 Courts have also been clear that the damages admitted must be real and may not be “too speculative or remote,” which would make them “not a necessary, natural, or proximate result of the taking.”74 If the possibility of a specific damage may occur but is unlikely, the value of such damages may not be considered in the final valuation of just compensation.75
68. See Portland Natural Gas Transp. Sys. v. 19.2 Acres of Land, 318 F.3d 279, 284 (1st Cir. 2003) (“[T]he Requirements supports the court’s determination that [it] would decrease the price a reasonable buyer was willing to pay. . . . [T]he encumbered land may not be used for structure, storage, or trees. . . . [A] landowner must submit proposed plans to the Pipeline Companies for authorization before beginning any work on or near the easement.”). 69. Idaho & W. Ry. Co. v. Coey, 131 P. 810, 810 (Wash. 1913). 70. See Cent. Ga. Power Co. v. May, 72 S.E. 900, 901 (Ga. 1911) (“The measure of such consequential damages is the diminution in the market value of the remainder of the property proximately arising from the causes just mentioned.”). 71. See AM. JUR., supra note 7 § 224 (“[I]t is proper to consider all factors indicative of the value of the property and which would have been present in the minds of a willing buyer and a willing seller if the peroperty were offered in a free market exchange.”). 72. See United States v. L.E. Cooke Co., 991 F.2d 336, 341 (6th Cir. 1993) (“[Federal] Rule [of Evidence] 702 should be broadly interpreted on the basis of whether the use of expert testimony will assist the trier of fact.”). 73. Kurth v. Iowa Dept. of Trans., 628 N.W.2d 1, 6 (Iowa 2001)(citing 26 AM. JUR. 2D, Eminent Domain § 294 (1996)). 74. See id. (noting that a jury can consider things that may entice a buyer to purchase the property) (citing 26 AM. JUR. 2D, Eminent Domain § 294 (1996)). 75. See ORGEL, supra note 50, § 59 (describing how potential, speculative, and remote damages may not be considered); see also AM. JUR.
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Finally, any benefits or increase in value to the remaining property may not be subtracted from the compensation for the taken property as part of the first step.76 If a hypothetical new highway would increase the value of a farm due to easier export of crops, for example, that value may not be used to offset the valuation of the property taken. 77 At most, benefits to the remainder “may be deducted from the consequential or severance damages.”78 If the benefits so completely overwhelm the damages, “the condemnor does not have to provide compensation for any severance damages.” 79 But even if the severance damages are completely negated by the listed benefits, the initial valuation of the property taken may not be touched; that amount is guaranteed to the condemnee.80
C. Before-and-After Method
Although the majority of jurisdictions do not use BAA,81 there are some specific advantages to the method over VPD,
supra note 7, § 281 (“While severance damages may be awarded for real diminution of value sustained by a remainder, recovery may not be based on speculative, remote, imaginary, contingent, or merely possible events.”). 76. See AM. JUR., supra note 7, § 324 (“Under the value plus damage rule, a property owner must receive just compensation for the entire value of the part of the land that is taken, regardless of the fact that the remaining land is benefitted by the project.”); see also Alabama Power Co. v. 1354.02 Acres, More or Less, of Land in Randolph County, Ala., 709 F.2d 666, 668 (11th Cir. 1983) (“[T[here is a distinction . . . between the land taken and the land remaining. The property owner must receive ‘just compensation’ for condemned property, without regard to any enhancement of the remaining land. Damage to remaining land...may be offset by enhancement in the value of that land.”). 77. See Ivy Inn, Inc., v. Metro. Atlanta Rapid Transit Auth., 340 S.E.2d 600, 601 (Ga. 1986) (elaborating about how the incremental benefit to the adjacent land because of the use of nearby land for a MARTA station “cannot be deducted from the value of the land actually taken.”). 78. See AM. JUR., supra note 7, § 324 (explaining that the special benefit “may not be deducted from value of the part taken”). 79. See id. (observing that courts base the “value plus damage” rule on constitutional or statutory requirement of just compensation). 80. See Westgate Ltd., v. Texas, 843 S.W.2d 448, 456 (Tex. 1992) (stating that “the landowner is in all cases entitled to at least the market value of the part taken”). 81. See Jerome P. Pesick, Eminent Domain: Calculating Compensation in Partial Taking Condemnation Cases, 82 MICH. BAR J. 12, 35
NECESSARY CHANGE 565 which will be outlined. Calculation of this method occurs through two steps, the first of which involves determining the difference between the fair market value of the property before and after the taking.82 This can be done through appraisals and real estate experts as a question for a finder of fact.83 Once the difference between the fair market value of the property before and after the taking is determined under the BAA model, the second step grants deductions for “benefits which may also accrue to the condemnee.”84 Although at least one theorist has stated that BAA may simply be another way of expressing the VPD method without any actual difference, he later noted that the application seems to take a more realistic value of the damages, rather than the artificial nature of the VPD. 85 With the VPD method, “an appraiser is prone to exaggerate both elements of compensation . . . [T]he formula encourages him to make allowance for damages though none in fact may have been sustained.”86 Instead, the BAA method, by definition, efficiently incorporates any damages into the final valuation, leaving less room for human error.87 As a result, BAA ensures more accurate and fair results.
(2003) (“Generally, just compensation is measured by determining the market value of the property that is taken.”). 82. See AM. JUR., supra note 7, § 237 (“Under this so-called ‘before- and-after’ rule, the measure of damages or compensation in such a case is the difference between the value of the whole tract, lot, or parcel of land immediately before the taking, and the value of the remaining part immediately afterward.”); see also ORGEL, supra note 50, § 51 (stating that one possible formula includes the “[d]ifference between the [f]air [m]arket [v]alue of the [p]roperty before and after the [t]aking). 83. See AM. JUR., supra note 7, § 237 (describing how the “before” and “after” valuations must also be calculated using the same method). 84. See id. § 335 (“[B]enefits accruing primarily to property not owned by the condemnee cannot be considered even though some incidental benefit may also accrue to the condemnee.”). 85. See ORGEL, supra note 50, § 51 (“Whether or not it is simply another mode of expressing “value of the land taken plus damages to the reminder” is a difficult question . . . it is at least more satisfactory than the more usual formula, for it recognizes the artificial nature of the dichotomy required by the latter.”). 86. Id. § 64. 87. See AM. JUR., supra note 7, § 283 (“In the case of a partial taking, if the before and after measure of compensation is properly submitted to the jury, there is no occasion for counsel or the trial court to talk about
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D. Defining Special and General Benefits
Broadly, benefits incorporated into a just compensation award may be either “special” or “general.” 88 Although the difference between the two has been characterized as “nebulous at best,”89 special benefits tend to be specific to the remaining property, while general benefits are those “which affect the entire community or neighborhood.” 90 In fact, it has been stated that “[g]eneral benefits are those the adjoining landowner shares in common with the general public, and special benefits are those resulting from a public work that enhances the value of the lands not taken because of their advantageous relation to the improvement.”91 One theorist has highlighted the differences by stating that “benefits which the public enjoys as a result of the improvement are classified as general benefits; benefits which inure to an individual landowner as a private advantage by reason of the direct relation of his remaining property to the improvement are classified as special benefits.” 92 Finally, the United States Court of Appeals for the Federal Circuit has noted that distinguishing between the two is not always an easy task, stating that, “as a general matter, special benefits are those that inure specifically to the landowner who suffered the partial taking and are associated with the ownership of the remaining land. In contrast, benefits that inure to the community at large are considered general.”93
“severance damage” as such, and indeed it may be confusing to do so. The matter is taken care of automatically in the ‘before and after’ submission.”). 88. See id. § 345 (defining special and general benefits). 89. Id. § 342. 90. Sullivan v. N. Hudson Cnty. R.R. Co., 18 A. 689, 690 (N.J. 1889). But see AM. JUR., supra note 7, § 345 (stating that a condemnee may receive a special benefit even if the entire neighborhood benefits from the taking). 91. AM. JUR., supra note 7, § 338. 92. Comment, Special Benefits and Just Compensation: Ensuring Fair Treatment of Landowners in Partial Taking Cases, 27 ME. L. REV. 279, 281 n.9 (1975) (citing 3 NICHOLS, EMINENT DOMAIN § 8.6202 (3d ed. 1974)). 93. See Hendler v. United States, 175 F.3d 1374, 1380 (Fed. Cir. 1999) (citations omitted). NECESSARY CHANGE 567
Although these concepts may seem distinct in theory, they can become clouded in practice. 94 If a partial taking for the creation of a railroad will help the community but helps the landowner the most, it would be considered a general benefit even though it also gives special benefits to the landowner. 95 Conversely, even if a general benefit helps the community equally, the benefits to the individual landowner are not lost, despite the general community advantage.96 Specifically, in forty-four states 97 and the federal government,98 “compensation for a partial taking will be reduced
94. See AM. JUR., supra note 7, § 343 (noting that because the distinction can be confusing, many courts have rejected it). 95. See AM. JUR., supra note 7, § 348 (observing that a rationale for this classification is that it “allow[s] setoff against the compensation for those whose land has been partially taken, but [does] not . . . require any payment from others in the neighborhood who benefit from the improvement but whose property has not been taken.”). 96. See id. (noting that these are not special benefits and cannot be deducted). 97. See generally Marion McRea v. Marion Cnty., 133 So. 278 (Ala. 1931); Weber v. Kenai Peninsula Borough, 990 P.2d 611, 612 (Alaska 1999); Taylor v. Arizona, 467 P.2d 251 (Ariz. 1970); Arkansas State Highway Comm’n v. Phillips, 398 S.W.2d 899 (Ark. 1966); E-470 Pub. Highway Auth. v. 455 Co., 3 P.3d 18 (Colo. 2000); Connecticut Ry. & Lighting Co. v. Waterbury, 18 A.2d 700 (Conn. 1941); Acierno v. Delaware, 643 A.2d 1328 (Del. 1994); Caspersen v. W. Coast Inland Nav. Dist., 198 So. 2d 65 (Fla. Dist. Ct. App. 1967); Williams v. State Highway Dep’t 85 S.E.2d 616 (Ga. 1971); Hawaii v. Midkiff, 516 P.2d 1250 (Haw. 1973); State ex rel. Symms v. Collier, 454 P.2d 56 (Idaho1969); Dep’t of Public Works & Bldgs. v. Barton, 19 N.E.2d 395 (Ill. 1939); Gradison v. Indiana, 300 N.E.2d 67 (Ind. 1973); Horak Prairie Farm, L.P. v. Cedar Rapids, 748 N.W.2d 504 (Iowa 2008); Davis v. Leawood, 893 P.2d 233 (Kan. 1995); Dep’t of Highways v. Sherrod, 367 S.W.2d 844 (Ky. 1963); Dep’t of Highways v. Trippeer Realty Corp., 276 So. 2d 315 (La. 1973); J.A. Rapaport Family Ltd. P’ship v. Brewer, 877 A.2d 1077 (Me. 2005); Washington Metro. Area Transit Auth. v. One Parcel of Land in Montgomery Cnty, 691 F.2d 702 (4th Cir. 1982); Hilbourne v. Suffolk Cnty., 120 Mass. 393 (1876); Michigan Dep’t of Transp. v. Tomkins, 749 N.W.2d 716 (Mich. 2008); Minnesota v. Strom, 493 N.W.2d 554 (Minn. 1992); Adcock v. Mississippi Transp. Comm’n, 981 So. 2d 942 (Miss. 2008); State Highway Comm’n v. Gatson, 617 S.W.2d 80 (Mo. Ct. App. 1981); Lewis & Clark Cnty. v. Nett, 263 P. 418 (Mont. 1928); Prudential Ins. Co. v. Cent. Nebraska Pub. Power & Irrigation Dist., 296 N.W. 752 (Neb. 1941); Dep’t of Highways v. Haapanen, 448 P.2d 703 (Nev. 1968); Lebanon Hous. Auth. v. Nat’l Bank of Lebanon, 301 A.2d 37 (N.H. 1973); State Highway Dep’t v. Kistler- Collister Co., 529 P.2d 611 (N.M. 1975); Lineburg v. Sandven, 21 N.W.2d 808 (N.D. 1946); Hurst v. Starr, 607 N.E.2d 1155 (Ohio Ct. App. 1992); Williams Natural Gas Co. v. Perkins, 952 P.2d 483 (Okla. 1997); State Highway Comm’n v. Hooper, 488 P.2d 421 (Or. 1971); Appeal of Philadelphia Elec. Co. (PECO),
568 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) by the value of any special benefits to be conferred on the remaining land, but not by the value of any general benefits,” presumably so the condemnee isn’t forced to solely bear the cost of the surrounding neighborhood’s gain. 99 Such consideration precludes the offset of general benefits against the compensation award.100 The Oregon Court of Appeals highlighted these special benefits in holding that “[a]ny devaluation of property retained by a condemnee can be offset by the value of any ‘special benefit’ that is conferred on the remaining property by the taking.”101 Other courts have agreed, with one stating that “only ‘special’ benefits can be deducted from any compensation due; ‘general’ benefits cannot be deducted.”102 The Missouri Court of Appeals for the Southern District has been even more specific, noting, “special benefits to a condemnee’s remaining real estate may be set off against an award of compensation for the real estate that is taken, but general benefits may not be set off.”103 In Bauman v. Ross, the Supreme Court held that for federal takings:
580 A.2d 424 (Pa. 1990); Capital Props, Inc. v. Rhode Island, 636 A.2d 319 (1994); Robinson v. Richland Cnty. Council, 358 S.E.2d 392 (S.C. 1987); State Highway Comm’n v. Emry, 244 N.W.2d 91 (S.D. 1976); Dep’t of Transp. v. Brevard, 545 S.W.2d 431 (Tenn. Ct. App. 1976); Texas v. McCarley, 247 S.W.3d 323 (Tex. App. 2007); Utah v. Harvey Real Estate, 57 P.3d 1088 (Utah 2002); Howe v. State Highway Bd., 187 A.2d 342 (Vt. 1963); Washington v. Green, 578 P.2d 855 (Wash. 1978); Hietpas v. Wisconsin, 130 N.W.2d 248 (Wis. 1964); State Highway Comm’n v. Rollins, 471 P.2d 324 (Wyo. 1970). 98. See Bauman v. Ross, 167 U.S. 548, 582 (1897) (noting that “the rule has been applied where the special benefits equaled or exceeded the damages, so that the owner of the land received nothing”). 99. See AM. JUR., supra note 7, § 338; Jagow v. E-470 Pub. Highway Auth., 49 P.3d 1151, 1157 (Colo. 2002) (limiting the offset to special benefits, not general benefits); see also Moyer v. Nebraska City Airport Auth., 655 N.W.2d 855, 863 (Neb. 2003) (limiting the offset to special benefits, not general benefits). 100. See AM. JUR., supra note 7, § 352 (describing that benefits that are common to the entire “community may not be deducted from a condemnation award.”). 101. State of Oregon v. Fullerton, 34 P.3d 1180, 1181 (Or. Ct. App. 2001). 102. Hendler v. United States, 175 F.3d 1374, 1380 (Fed. Cir. 1999). 103. See Brandon v. Estate of LaFavre, 9 S.W.3d 755, 758 (Mo. Ct. App. 2000). NECESSARY CHANGE 569
[I]f the proposed road or other improvement inure to the direct and special benefit of the individual out of whose property a part is taken, he receives something which none else of the public receive, and it is just that this should be taken into account in determining what is compensation.104
In contrast, the Court would “exclude the indirect and general benefits which result to the public as a whole, and therefore to the individual as one of the public; for he pays in taxation for his share of such general benefits.”105 This decision was based upon the majority of states’ own holdings.106 In contrast, six states—California,107 New Jersey,108 New York, 109 North Carolina, 110 Virginia 111 and West Virginia, 112 —
104. Bauman v. Ross, 167 U.S. 548, 581–82 (1897). 105. Id. at 581. 106. See id. at 583 (“[I]n the greater number of the states, unless expressly forbidden by constitution or statute, special benefits are allowed to be set off, both against the value of the part taken, and against damages to the reminder . . . .”). 107. See Los Angeles Cnty. Metro. Transp. Auth. v. Cont’l Dev. Corp., 941 P.2d 809, 809 (Cal. 1997) (“A rule permitting offset of all reasonably certain, immediate and nonspeculative benefits has the virtue of treating benefits and severance damages evenhandedly.”). 108. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526–27 (N.J. 2013) (“[W]hen a project calls for the construction of dunes along the entire public project requires the partial taking of property, ‘just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property.”). 109. See Chiesa v. New York, 324 N.E.2d 329, 333 (N.Y. 1974) (“The New York rule . . . may be formulated as follows: Value of land taken consequential damages to remainder minus general and special benefits = just compensation.”). 110. See Bd. of Transp. v. Jones, 255 S.E.2d 185, 187 (N.C. 1979) (“Where only a part of a tract is taken, the measure of damages for said taking shall be the difference between the fair market value of the entire tract immediately prior to said taking and the fair market value of the remainder immediately after said taking, with consideration being given to any special or general benefits resulting from the utilization of the part taken for highway purposes.”) (quoting N.C. GEN. STAT. § 136-112 (1959)). 111. See Long v. Shirley, 14 S.E.2d 375, 377–78 (Va. 1941) (stating that the intent of the Virginia legislature was to disregard the differences between special and general benefits). 112. See Guyandotte Valley Ry. v. Buskirk, 50 S.E. 521, 522 (W.Va. 1905) (“Benefits, whether general and common to all property affected by the
570 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) reject the distinction between special and general benefits, and incorporate any reasonably calculable benefit that increases the fair market value of the remaining property, regardless of whether the benefit has a larger impact on the community as a whole.113 Notably, all six jurisdictions employ the BAA method of just compensation calculation.114 The earliest of these cases, Guyandotte Valley Railway Co. v. Buskirk, was decided in 1905, however Los Angeles County Metropolitan Transportation Authority v. Continental Development Corporation (California) and Borough of Harvey Cedars v. Karan (New Jersey) have both been decided in the past twenty years.115 Furthermore, Chiesa v. New York (New York) and Board of Transportation v. Jones (North Carolina) were decided in the 1970s, making the disregard for the distinction between general and special benefits a seemingly relatively recent movement.116 Other than Harvey Cedars, which will be discussed in Part V, the primary case considering both special and general benefits is Continental Development Corporation. 117 In that case, the California Supreme Court overruled a century’s worth of precedent in a matter over the construction of an elevated light rail.118 The light rail reduced the landowner’s view, but it also work of improvement, or peculiar to it, when material, can obviously be considered for but one purpose, namely, deduction from the damages to the property.”). 113. See AM. JUR., supra note 7, § 325, (stating that under a strict interpretation of the before-and-after rule, any benefit is taken into consideration if it affects the value of the taking); see also id. § 343 (some courts find the distinction so confusing they’ve abolished it, and that other jurisdictions have abolished the distinction by statute). 114. See id. § 325 (noting that both special and general benefits are included into consideration). 115. See generally Guyandotte Valley Ry. v. Buskirk, 50 S.E. 521 (W.Va. 1905); Los Angeles Cnty. Metro. Trans. Auth. v. Cont’l Dev. Corp., 941 P.2d 809 (Cal. 2002); Borough of Harvey Cedars v. Karan, 70 A.3d 524 (N.J. 2013). 116. See generally Chiesa v. New York, 324 N.E.2d 329 (N.Y. 1974); Bd. of Transp. v. Jones, 255 S.E.2d 185 (N.C. 1979). But see Long v. Shirley, 14 S.E.2d 375 (Va. 1941). 117. 941 P.2d 809 (Cal. 2002). 118. See Continental Dev. Corp., 941 P. 2d at 811–12 (“Here, the Los Angeles County Metropolitan Transportation Authority (the MTA) brought a condemnation action to acquire a narrow strip of land for an easement along one side of a parcel owned by Continental Development Corporation
NECESSARY CHANGE 571 provided the benefit of access to quicker and easier transportation.119 As a result, the Court found that since the goal of the Takings Clause is to make condemnees whole, and nothing more, true and complete indemnity requires the offset of all benefits actually received . . . including general benefits.120 In addition, some states have rejected the distinction between special and general benefits only in certain circumstances and for specific types of takings.121 In at least one jurisdiction, the special benefits alone may count as just compensation, without any financial remuneration necessary.122 While VPD typically doesn’t allow benefits to detract from the valuation of the taken property, merely the severance damages to the remainder, it’s possible under the BAA context that effectively no compensation will be required if the benefits to the remaining property are large enough as to completely overwhelm the loss of the property.123 For example, if the construction of a dune is the only thing that can prevent a beach house from
(Continental) for the construction of a portion of an elevated light rail line known as the Green Line.”). 119. See id. at 812 (relaying that the trial court did not allow the evidence because the court reasoned “that proximity to the transit station was not a special benefit because it was shared by numerous properties in the vicinity”). 120. See id. at 824 (“A rule permitting offset of all reasonably certain, immediate and nonspeculative benefits has the virtue of treating benefits and severance damages evenhandedly.”). 121. See AM. JUR., supra note 7, § 343 (rejecting the distinction because of the confusion caused); see also Crum v. Mt. Shasta Power Corp., 4 P.2d 564, 573 (Cal. 1931) (“In eminent domain cases, other than those which involve rights of way, both general and special benefits which accrue to either the portion taken or that which remains, may be considered and set off against the damages assessed.”). 122. See AM. JUR., supra note 7, § 338 (“Special benefits conferred on a property owner’s remaining property as a direct result of a taking may constitute just compensation”); see also Kavanau v. Santa Monica Rent Control Bd., 941 P.2d 851, 864 (Cal. 1997) (“More explicitly, the court has long held that the special benefits conferred on a property owner's remaining property as a direct result of a taking may constitute just compensation.”). 123. See MaryAnn Spoto, Harvey Cedars Couple Receives $1 Settlement for Dune Blocking Ocean View, THE STAR-LEDGER (Sep. 25, 2013, 1:21 PM), http://www.nj.com/ocean/index.ssf/2013/09/harvey_cedars_sand_dune_dispute_s ettled.html (stating that the initial settlement offer was for $300, but the case eventually settled for $1) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 572 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) guaranteed destruction, that special benefit, if calculable in financial terms, may completely offset the extent to which the government must provide just compensation.124 Others have looked to an “increase in the market value of the remaining property [as] the sole test by which a court ascertains the deductibility of a benefit,” where “the distinction between general and special benefits becomes meaningless, since a finding of market value necessarily includes value contributed by any kind of benefit, general as well as special.”125 Therefore, general benefits are included because they recognize the gain realized by the landowner that he would undoubtedly receive, regardless of the gain others will also obtain.126 All jurisdictions agree that any benefit, either special or general, must be real and cannot be speculative, which is true of damages in both the VPD and BAA context. 127 Like damages, future benefits can only be used if they are certain, or reasonably certain to be realized. 128 These benefits must additionally be calculable and measurable in financial terms so they may be deducted from the compensation award.129 For example, if the benefit of a storm protective dune and extended beach would save the remaining property from almost certain destruction, the benefit can be reasonably calculated.130 As a corollary, if a highway might help a farm but it is unclear
124. See id. (detailing how dunes the dunes were created after Hurricane Sandy for protection by the Army Corp of Engineers). 125. AM. JUR., supra note 7, § 339; Illinois State Toll Highway Auth. v. American Nat. Bank & Trust Co. of Chicago, 624 N.E.2d 1249, 1255 (Ill. 1994) (stating that any benefits that are not speculative or conjectural may be considered). 126. See AM. JUR., supra note 7, § 353 (“[B]enefits resulting from an improvement generally are not deductible from the damage award where the condemnee's remaining land has been or will be assessed for the cost of the improvements.”). 127. See id. § 281 (“[R]ecovery may not be based on speculative, remote, imaginary, or merely possible events.”). 128. See id. § 331 (noting that future benefits can only be used if a finder of fact is certain they will be realized). 129. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526–27 (N.J. 2013) (“We now conclude that when a public project requires the partial taking of property, ‘just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non-conjectural factors that either decrease or increase the value of the remaining property.”). 130. See id. at 529 (demonstrating how storm protection benefits may be calculable). NECESSARY CHANGE 573 how much or the benefits cannot be quantified in economic terms, those benefits may not be included in the final compensation award. While VPD protects the condemnee by adding damages, BAA makes takings easier, or at least less costly, for the government, as there can be a greater deduction for benefits from the valuation.131
IV. Impact on Environmental Takings
Since 2005, Hurricane Katrina destroyed New Orleans,132 An Inconvenient Truth exposed the practical impact of global warming, 133 the explosion at Deepwater Horizon released 4.9 million barrels of oil into the Gulf of Mexico,134 and Hurricane Sandy caused severe damage to the northeastern coast of the United States.135 The legal ramifications of these crises are endless, involving questions of tort liability, criminal negligence, and property claims, among others. 136 Environmental and property law have become increasingly intertwined as a result of increasing land use and zoning regulations, which can dictate liability and responsibility for preventative and post- environmental crisis cleanup measures. 137 Property law may
131. See ORGEL, supra note 50, §§ 50–51 (listing the requirements and benefits of each method). 132. See In re Katrina Canal Breaches Litig., 696 F.3d 436, 443 (5th Cir. 2012) (noting the extent of damage caused by Hurricane Katrina). 133. AN INCONVENIENT TRUTH (Lawrence Bender Prods. 2006). 134. JANE LUBCHENCO ET AL., BP DEEPWATER HORIZON OIL BUDGET: WHAT HAPPENED TO THE OIL? 1 (U.S. Geological Survey 2010), available at http://www.usgs.gov/foia/budget/08-03- 2010...Oil%20Budget%20description%20FINAL.pdf (stating that 4.9 million barrels of oil were released) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 135. Superstorm Sandy Slams Northeast, Triggers Massive Blackouts and Flooding, CBS NEWS & ASSOCIATED PRESS (Oct. 30, 2012, 2:00 AM) www.cbsnews.com/news/superstorm-sandy-slams-northeast-triggers- massive-blackouts-and-flooding/ (describing the extent of the damage in the northeast) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 136. See In re Katrina Canal, 696 F.3d at 443 (listing plaintiff’s claims against the federal government for damages caused by Hurricane Katrina). 137. See John Schwartz, Accord Reached Settling Lawsuit Over BP Oil Spill, N.Y. TIMES (Mar. 2, 2012),
574 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) dictate if beachfront property owners are responsible for building levees to prevent Hurricane Katrina destruction, or if such actions are within the purview of the government.138 Likewise, property law has helped determine responsibility for the Deepwater Horizon oil spill cleanup.139 While environmental jurisprudence has developed significantly over the past forty years,140 the law of takings has remained relatively unchanged, with the notable exception of Kelo v. City of New London.141 Since the founding of the United States, there have been few notable changes in our understanding of eminent domain, just one of which was related to partial takings.142 This has left the field underdeveloped in certain aspects.143 Eminent domain’s staggered development is not necessarily flawed, but its slow evolution creates a problem when planning for the future.144 The jurisprudence of eminent domain highlights how legal regimes that seek to remedy past wrongs in a static world are insufficient when faced with prospective issues that can have severe consequences in the future. If the government is expected to take action to prevent coastal
http://www.nytimes.com/2012/03/03/us/accord-reached-settling-lawsuit-over-bp- oil-spill.html?_r=0 (stating that British Petroleum would be responsible for paying for the cleanup in the wake of the Deepwater Horizon spill) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 138. See 50 AM. JUR. 2D. Levees and Flood Control § 3 (2014) (discussing federal powers and responsibilities in relation to flood prevention measures). 139. See Schwartz, supra note 137 (summarizing the settlement reached by British Petroleum, who owned the Deepwater Horizon well). 140. See References/Links: Environmental Laws & Treatises, NATIONAL RESOURCES DEFENSE COUNCIL, http://www.nrdc.org/reference/laws.asp (indicating that a majority of federal environmental statutes have been enacted since 1972) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 141. See SINGER, supra note 23, at 678–92 (providing a historical background of takings law indicating that takings jurisprudence has not changed much since Penn Central). 142. See id. (discussing how takings jurisprudence is historically static). 143. See supra Part II (summarizing the history of eminent domain). 144. See SINGER, supra note 23 (outlining three issues as a result of takings jurisprudence: (1) the Supreme Court has developed different tests over time; (2) precedent; and (3) issues of fairness and justice). NECESSARY CHANGE 575 destruction caused by the projected increase in tropical storms,145 it should not be forced to rely on property law developed decades before such a crisis could have been predicted. If even one property is left unprotected because of disagreements over just compensation, the entire area is at risk of destruction by a coastal storm.146 The current partial takings jurisprudence consequently gives to the individual undue priority over society, limiting the government’s ability to respond to future environmental challenges. This misalignment of priorities has and will continue to give rise to scenarios in which the government cannot take necessary protective measures due to overwhelming costs.147 As a result, it is necessary to ease the burden on the government in the case of partial takings for the good of society as a whole. The current methods of calculating just compensation in partial takings cases are outdated in most jurisdictions and do not allow for the increased need for government to confront environmental issues head-on.148 These issues are, in many cases, not predictable, and will strain the status quo to a breaking point. 149 The modification proposed will lessen the burden on jurisdictions trying to get a step ahead of the curve, whereas current statutory regimes such as VPD have the effect of protecting the individual when it is the general public that needs greater protection in the face of impending environmental
145. See Future Climate Change, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, http://www.epa.gov/climatechange/science/future.html (last visited March 15, 2015) (stating that climate change will cause an increase in tropical storms) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 146. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526 (N.J. 2013) (explaining the importance of a dune in front of the Karan’s beachfront property). 147. See Anthony F. DellaPelle & Richard P. DeAngelis, Jr., Commentary, New Jersey’s New View on Parital Takings Compensation, 65 PLAN. & ENVTL. L. J. 4 (Nov. 2013) (raising the issue as to whom should pay for partial takings). 148. See supra Part II. B (defining the value plus damage method to calculate just compensation and its shortcomings). 149. See AM. JUR., supra note 7, § 324 (commenting that under VPD the landowner will get just compensation for the entire value of the property taken regardless of any benefit to the landowner as a result of the taking). 576 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) challenges. 150 As a result, a widespread adoption of the BAA method for calculating just compensation in partial takings cases is the best solution, provided the award can be offset for both reasonably calculable and definite special and general benefits.
V. Borough of Harvey Cedars v. Karan
In 2013, the Supreme Court of New Jersey significantly altered its partial takings jurisprudence with its decision in Borough of Harvey Cedars v. Karan. 151 The environmental concerns it addressed highlight the challenges faced by courts attempting to balance the rights of property owners with the need for state action, notably in an environmental context. In 2008, the U.S. Army Corps of Engineers began collaborating with the New Jersey Department of Environmental Protection and local municipalities on a beach-restoration and storm-protection project on Long Beach Island, New Jersey. 152 The plan consisted of extending the shoreline by 200 feet into the ocean to prevent beach erosion, maintaining the amount of sand every five to seven years, and building trapezoidal dunes twenty- two feet high and thirty feet wide at the top, to protect the island from future storms capable of destroying homes and businesses in the region.153 As part of the project, the Borough of Harvey Cedars sought to secure eighty-two perpetual easements along the shore, upon which the dunes would be built.154 Sixty-six property owners granted their voluntary consent, 155 and when the remaining sixteen property owners balked, the Borough adopted an
158. See Superstorm Sandy Slams Northeast, supra note 135 (explaining the last minute changes in forecasting for the scope of the storm). 151. See New Jersey’s New View, supra note 147 (“This decision represented a departure by the court form a long-standing doctrine known as the ‘special benefits’ doctrine, which had controlled the valuation of properties in partial takings cases for decades.”). 152. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 527–28 (N.J. 2013) (providing background to the dune restoration project at issue). 153. See id. at 527 (describing the planned beach restoration and dune construction). 154. See id. (“The Borough’s obligation was to secure eighty-two perpetual easements over the portions of private beachfront properties closest to the ocean on which the dunes would be built.”). 155. See id. at 527–28 (“The Borough acquired sixty-six easements by voluntary consent of the property owners.”). NECESSARY CHANGE 577 ordinance taking from each the sliver of property under its statutory eminent domain authority.156 Harvey and Phyllis Karan were the owners of one of the holdout properties, and contested the nominal amount of $300 offered by the government in recompense for the land taken and the devaluation of the remaining property.157 At the trial and appellate levels, the New Jersey courts found that “merely because ‘differing property owners enjoy the benefit to different degrees does not convert a general benefit into a special benefit,’”158 and subsequently disregarded the general benefits provided to the Karans.159 Furthermore, the trial court instructed the jury to only consider damages, which consisted mostly of a reportedly decreased view of the ocean, and special benefits, plus the value of the taken land in the award.160 The jury was not allowed to consider general benefits, of which the storm protection was the key feature.161 Without the project, Randall A. Wise of the U.S. Army Corps of Engineers determined there was only a 27% chance of the Karan’s’ property surviving fifty years without storm damage.162 Furthermore, over a thirty-year period, there was a 56% likelihood of a storm “totally” damaging their property without the creation of the dunes.163 With the project completed, the Karan’s property would likely survive the next 200 years’ worth of storms.164 Wise, a civil engineer specializing in coastal
156. See id. at 528 (“However, the owners of sixteen beachfront properties, including the Karans, did not consent. As a result, in July 2008, the Borough adopted an ordinance authorizing it to acquire easements over those sixteen properties through its statutory powers of eminent domain.”). 157. See id. (“The Karans rejected the Borough’s offer of $300 as compensation for both the land taken and any devaluation of the remaining property.”). 158. Id. at 529. 159. See id. at 529–30 (noting the trial and appellete courts disregard of the general benefits given to the Karans). 160. See id. at 531 (“However, the court advised the jury to disregard, in valuing the Karans’ remainder property, any general benefit flowing from the public project.”). 161. See id. (citing jury instructions state that the jury not consider general benefits). 162. See id. at 529 (presenting statistics related to the value added from the dune construction). 163. See id. (discussing the probability of future damage). 164. See id. (noting the benefits of the project). 578 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) engineering, calculated this information using statistical analysis that determined decreasing levels of risk for each “line” of homes stretching away from the ocean.165 Wise’s analysis became reality, much more quickly than he could have ever predicted. Hurricane Sandy devastated Long Beach Island in 2012, inflicting an estimated $700,000,000 in damage. 166 Notably, the places where the Army Corps of Engineers’ dunes had been created were spared from the destruction.167 “There are the places that had a protective dune system installed and, as a result, sustained minimal damage. Then there are the areas where there were no tall dunes, where Sandy made its destructive powers known.”168 Hurricane Sandy, in effect, justified Wise’s proposal and solidified the preventative measures as a valuable public purpose. The project budget was roughly $25,000,000, with the Borough responsible for just $1,000,000 of the total amount.169 The jury calculated compensation using the previous New Jersey method of calculation, which was the BAA method but did not allow for consideration of general benefits.170 Using this model,
165. See id. (listing Randall A. Wise’s qualifications and role as an expert). 166. See Ryan Hutchins, Long Beach Island Officials Shocked at Extent of Damage from Hurricane Sandy, THE STAR-LEDGER (Oct. 31, 2012, 8:43 PM), http://www.nj.com/news/index.ssf/2012/10/lbi_hurricane_sandy_damage.html (“It will take at least $700 million to remake this 18-mile strip of land, an estimate that could certainly surpass $1 billion as more is learned.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 167. See Ryan Hutchins & Seth Augenstein, N.J. Sand Dunes Protected Shore Towns from Hurricane Sandy’s Wrath, THE STAR-LEDGER (Nov. 6, 2012, 7:05 AM), http://www.nj.com/news/index.ssf/2012/11/nj_sand_dunes_protected_shore.html (describing the difference in damage from Hurricane Sandy when comparing areas that had dune construction and those that had not) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 168. Id. 169. See Harvey Cedars, 70 A.3d at 530 (“The cost of the project was approximately twenty-five million dollars, with the Borough bearing approximately one million dollars of the cost, the State approximately seven- and-one-half million dollars, and the federal government the balance.”). 170. See id. at 531 (“The trial court charged the jury that the Karans were entitled to ‘just compensation’ for the easement acquired by the Borough ‘measured by the difference between the fair market value of the entire
NECESSARY CHANGE 579 and unable to consider the storm protection benefits the Karan’s would receive because they were deemed general and would help the island as a whole, the jury level calculated the just compensation of the taken property, plus damages to the remainder, at $375,000.171 The damages mostly consisted of the loss of some view due to the large dunes.172 If the $375,000 amount were to be prorated to the remaining fifteen properties, the Borough would have had to pay $6,000,000, or six times its portion of the budget of the project, simply to acquire the easements.173 This does not even take into consideration the other sixty-six property owners who would likely demand similar compensation and not acquiesce towards a much smaller figure, as they did.174 Furthermore, that $6,000,000 figure does not include the actual construction costs, which would drive the number significantly higher. 175 As such, full compensation would have made the costs of the project incredibly high, and if the lower court’s decision had stood, likely impossible to carry out. Following the decisions in favor of the Karans by the trial and appellate levels, the Borough appealed to the New Jersey Supreme Court.176 The New Jersey Supreme Court held that just compensation in partial-takings “must be based on a consideration of all relevant, reasonably calculable, and non- conjectural factors that either decrease or increase the value of the remaining property.” 177 As such, the Court removed the distinction between general and special benefits, finding them to be outdated, contradictory, and impossible to distinguish. 178 property . . . immediately before the taking and the fair market value . . . immediately after the taking.”). 171. See id. (“The jury returned an award of $375,000 as compensation for the easement and for any damages to the remainder of the Karans’ property.”). 172. See id. at 528 (discussing the damages from the taking). 173. See id. (discussing the scope of the Borough’s project). 174. See id. at 527–28 (noting that some of the other property owners gave the easements without “just compensation”). 175. See id. at 528 (noting the initial compensation offered only considered compensation for the value of the land taken and any loss of value to the remaining property). 176. See id. at 532 (discussing the procedural history of the case). 177. Id. at 526–27. 178. See id. at 539–40 (“As to this distinction, it has been said that more rules, different from and inconsistent with each other, have been laid
580 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
Instead, the Court simply looked at the fair market value of the property before and after the taking by considering all non- speculative factors that any real buyer would consider,179 with the end goal that compensation “in a partial-takings case must be ‘just’ to both the landowner and the public.”180 The Court held that a formula that “does not permit consideration of the quantifiable benefits of a public project that increase the value of the remaining property” due to general benefits that increase value to the neighborhood as a whole is not just and does not reflect the owner’s true loss.181 The practical effect of this change allows the finder of fact to consider general benefits in the calculation process because they aided the public and not just the landowner.182 As its rationale, the New Jersey Supreme Court focused on the different degrees of benefit shared by the landowners that make the storm protection a special benefit, rather than a general benefit.183 The Court also heavily focused on the difficulty courts have had in distinguishing between general and special benefits, with contradictory results that have led to confusion.184 By erasing the distinction between the two, the Court chose to simplify the determination to any factor that would be considered in a typical arms-length negotiation.185 down on this point than upon any other point in the law of eminent domain.”) (citing Daniels v. State Rd. Dep’t, 170 So.2d 846, 854 (Fla. 1964)). 179. See id. at 540 (“Benefits that both a willing buyer and willing seller would agree enhance the value of property should be considered in determining just compensation, whether those benefits are categorized as special or general.”). 180. See id. at 527 (discussing the intent behind compensation and the ultimate goal that the award be just). 181. See id. (explaining the shortcomings of the calculations used by the courts below). 182. See id. at 537 (noting the general definition of general benefits) 183. See id. at 541 (“Unquestionably, the benefits of the dune project extended not only to the Karans but also to their neighbors further from the shoreline. . . . Therefore, the Karans benefitted to a greater degree than their westward neighbors.”). 184. See id. at 539 (“The task of distinguishing between special and general benefits—as defined by case law in New Jersey and other jurisdictions— is difficult ‘even for trained legal minds.’”). 185. See id. at 543 (“The Borough should not have been barred from presenting all non-speculative, reasonably calculable benefits from the dune project—the kind that a willing purchaser and willing seller would consider in an arm’s length transaction.”). NECESSARY CHANGE 581
To calculate the final valuation amount, finders of fact may hear testimony from real estate appraisal experts as to the value of these general benefits upon the specific property owner.186 If the property is likely to be damaged or destroyed without the completed government project, the resulting compensation will be lowered accordingly to reflect the project’s necessity.187 To that end, a court may choose to award nominal damages if the reasonably calculable benefits vastly outweigh the severance damages. 188 In fact, Harvey and Phyllis Karan eventually settled for $1 in nominal damages following Hurricane Sandy and the destruction of much of Long Beach Island, despite the initial offer of $300 by the Borough.189 The decision in Harvey Cedars presents a dramatic shift in eminent domain law by allowing use of eminent domain in natural disaster prevention projects that would otherwise be prohibitively expensive. 190 Without the decision, the Borough would likely have been unable to complete the project, at least within the apportioned budget, placing all of Long Beach Island at continued risk from severe storms.191
186. See id. at 544 (“At that trial, the Borough will have the opportunity to present evidence of any non-speculative, reasonably calculable benefits that inured to the advantage of the Karans’ property at the time of the taking.”). 187. See id. (“In short, the quantifiable decrease in the value of their property—loss of view—should have been set off by any quantifiable increase in its value—storm-protection benefits.”). 188. See id. at 530 (“Dr. Molliver determined that the Borough’s taking of 3,381 square feet of the Karan’s property had a de minimis value of only $300.”). 189. See Harvey Cedars Couple Receives $1, supra note 123 (stating the initial and final settlement offers). 190. See Daniel D. Barnhizer, Givings Recapture: Funding Public Acquisition of Private Property Interests on the Coasts, 27 HARV. ENVTL. L. REV. 295, 295–97 (2003) (describing the increase in government “givings” actions that increase the value of coastal private property). 191. See Harvey Cedars, 70 A.3d at 527 (noting that “[t]he dune- construction project required the securing of easements on properties bordering the ocean”). 582 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
VI. Proposed Change and Its Effects
This Note proposes that other jurisdictions adopt the aforementioned holding in Harvey Cedars and should modify their just compensation calculation formulas to include both general and specific benefits as part of the BAA analysis.192 As the Harvey Cedars Court noted, the two categories of benefits are often interpreted in a contradictory manner, and even the most trained of legal minds struggle to identify the difference in practice.193 In Harvey Cedars, the rest of the neighborhood shared, in varying degrees, the general benefit of protection against the destruction from a future storm.194 Although the benefits received from this protection are practical, such as the continued security of a home, and not exclusively financial, such as an increase in business due to a new highway, the price and financial value of that home is still calculable. 195 As the storm protection was classified as a general benefit shared by the neighborhood, the benefits afforded by the dunes could not be calculated under the old formula of disallowing general benefits to be considered.196 However, the old New Jersey formula ignores the fact that Karan received a disproportionate special benefit within the general benefit, and does not grant the government leeway if their project
192. See AM. JUR., supra note 7, §§ 290, 343 (stating that some jurisdictions effectively disregard the distinction between general and special benefits in deducting from the total just compensation, either statutorily or effectively). 193. See Harvey Cedars, 70 A.3d at 539 (“The task of distinguishing between special and general benefits—as defined by case law in New Jersey and other jurisdictions—is difficult ‘even for trained legal minds.’”). 194. See id. at 529 (“[C]ertain storms would cause damage to frontline properties but not to properties further from the ocean. Risk of storm damage drops significantly the further a property is from the ocean . . . .”). 195. See id. at 543–44 (“The jury in this case should have been charged that the determination of just compensation required calculating the fair market value of the Karans' property immediately before the taking and after the taking (and construction of the twenty-two-foot dune).”). 196. See id. at 544 (“The trial court’s charge required the jury to disregard even quantifiable storm-protection benefits resulting from the public project that increased the fair market value of the Karans’ property.”). NECESSARY CHANGE 583 will save an entire neighborhood from certain environmental destruction.197 Instead, the new formulas include all benefits and damages that are reasonable calculable, and which may increase or decrease the value of the remaining property.198 In so doing, courts will likely award compensation that closely resembles an arms-length exchange where the condemnee sells the taken piece of property at the true fair market price. 199 As a result, the compensation award will be significantly fairer to the government and will result in fewer windfalls for the condemnee.200 In Harvey Cedars, the Court discussed the historical development of general and special benefits, and noted that the distinction, at least in New Jersey, came from railroads in the 1800s that took property to build tracks and gave only nominal damages as compensation.201 The railroads argued that increased population and commerce were enough to essentially eliminate any compensation.202 The effect of this new formula, however, would preclude such an unfair result to the landowner, as the benefits considered must be reasonably calculable and cannot have the same indefinite timeline or assistance that the railroads
197. See id. at 527 (“A formula . . . that does not permit consideration of the quantifiable benefits of a public project that increase the value of the remaining property in a partial-takings case will lead to a compensation award that does not reflect the owner’s true loss.”). 198. See id. at 526–27 (“We now conclude that when a public project requires the partial taking of property, ‘just compensation’ to the owner must be based on a consideration of all relevant, reasonably calculable, and non- conjectural factors that either decrease or increase the value of the remaining property.”). 199. See id. at 543 (“The Borough should not have been barred from presenting all non-speculative, reasonably calculable benefits from the dune project—the kind that a willing purchaser and willing seller would consider in an arm’s length transaction.”). 200. See id. at 527 (“In a partial-takings case, homeowners are entitled to the fair market value of their loss, not to a windfall, not to a payout that disregards the home’s enhanced value resulting from a public project.”). 201. See id. at 536–37 (noting that railroads justified low compensation amounts on the benefits transportation development conferred on communities). 202. See id. at 536 (“[R]ailroads argued that the benefits from increased population and commerce . . . made the remainder property more valuable.”). 584 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) preferred.203 Simply put, “[t]he historical reasons that gave rise to the development of the doctrine of general and special benefits no longer have resonance today.” 204 With the allowance of any quantifiable yet definite benefit to be considered, the problem of unfair results to the landowner may be limited, if not eliminated.205 Certainly in cases like Harvey Cedars, when the property will almost undoubtedly be destroyed without action, 206 full consideration should be left to the finder of fact since the remainder may be worthless without the government’s taking, regardless of general or specific benefit determination.207 Ideally, the proposed modification, through simple fairness, would encourage the government to partially take property for environmentally friendly purposes, such as beach replenishment, storm protection, alternative energy creation, among other goals, as there will be a financial incentive for projects due to a lower economic cost.208
VII. Arguments and Alternatives
Like many other debates, the proposed change here has its advocates and detractors; the government on one side, and landowners on the other. 209 Despite concerns over individual
203. See id. at 542 (explaining why the railroad formula is not workable today). 204. Id. 205. See id. at 544 (concluding that decreases in property values should be offset by value increases resulting from storm-protection benefits because those affected by government takings “are entitled to just compensation, a reasonable calculation of any decrease in the fair market value of their property after the taking”). 206. See id. at 529 (“Without the dune project, the Karans’ project had only a 27% chance of surviving fifty years without any storm damage.”). 207. See id. at 533 (“’[T]he gate keeping function of the trial court is to determine if evidence is reliable and not speculative, and once determined to be reliable, it is for the jury to determine what, if any, impact the evidence presented has on just compensation.’”) (citing State v. Caoili, 693 A.2d 275 (N.J. 1994)). 208. See Barnhizer, supra note 190, at 297 (stating that the “government must increase its emphasis on property acquisition as a response to repetitive flood losses and heightened flood risks on coastal floodplains”). 209. See Harvey Cedars, 70 A.3d at 526–27214 N.J. at 388–89 (describing the tension between a compensation method that incorporates
NECESSARY CHANGE 585 rights, landowners have been increasingly in favor of such a change following the destruction caused by Hurricane Sandy,210 when the need for partial takings to build storm protection at cost-effective prices became more important than maximizing financial compensation for the landowner. 211 As a result, it is important that just compensation be fair to both the government and the landowner.212 Supporters of the Harvey Cedars decision might argue that the rule change acts as an incentive for the government to take property for the environmental benefit of the public.213 When building storm protection, alternative forms of energy creation, or even a proliferation of oil pipelines to cheapen prices, among other possible scenarios, the landowners are the ultimate beneficiaries.214 The inclusion of general benefits, as recognized speculative future benefits and one that is limited to immediately ascertainable benefits). 210. See Erin O’Neill, Harvey Cedars Neighbors Say Dune Protection Outweighs Obstruction of Ocean Views, THE STAR-LEDGER (July 9, 2013, 6:29 AM), http://www.nj.com/news/index.ssf/2013/07/karan_harvey_cedars_dunes. html (“Lalevee—a 78-year-old Bergen County resident—said his views of the crashing waves along the shoreline were obstructed by the dune project, but ‘I rather have that than have a lot of other problems.’”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 211. See MaryAnn Spoto, Toms River to Start Eminent Domain Proceedings Against 16 Oceanfront Property Owners, THE STAR-LEDGER (OCT. 22, 2013, 8:31 PM), http://www.nj.com/ocean/index.ssf/2013/10/toms_river_votes_to_start_ eminent_domain_proceedings_against_16_oceanfront_property_owners.html (“‘If this dune system was in place during Hurricane Sandy, the devastation that impacted our community would not have occurred,’ Wittmann said. ‘It would not have occurred because the dune would have protected the township.’”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 212. See Harvey Cedars, 70 A.3d at 527 (“In a partial-takings case, homeowners are entitled to the fair market value of their loss, not to a windfall, not to a payout that disregards the home’s enhanced value resulting from a public project.”). 213. See Barnhizer, supra note 190, at 295–99 (discussing government takings actions designed to protect coastal property and the incentives provided to landowners by “landowners who receive compensation for the value of past governmental givings in addition to whatever value the landowner may have created in the property through individual actions related to real market risks”). 214. See id. at 300 (“At the center of the controversy is the inevitable tension between the rights and duties . . . This tension has long been
586 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) by the Harvey Cedars decision, would therefore recognize their beneficiary status as an alternative means of compensation. Furthermore, without such environmentally or energy focused takings, society suffers as a result. 215 When the government cannot afford to build storm protection to shelter a number of houses along the coastline from being destroyed, it does not matter how much a landowner believes their view is worth.216 As federal, state, and local governments increasingly seek to perform takings for environmental or energy purposes, the idea of being unable to afford projects is a real possibility.217 The inability to effectuate takings within reasonable financial limits has forced the State of Texas to cancel a $40 million beach restoration project similar to the one in Harvey Cedars and necessary to prevent high erosion rates from destroying infrastructure,218 in the wake of ongoing litigation in Severance v. Patterson.219
recognized in Fifth Amendment takings jurisprudence as the extent to which private individuals should bear burdens intended to benefit the community at large.”). 215. See Barnhizer, supra note 190, at 310 (“[W]e may reach a point—if indeed we have not already passed it—where it will be too expensive to pull back, even if the cost of not doing so includes enormous economic and human losses and catastrophic environmental damage.”). 216. See id. at 313 (“Over time, beaches, dunes, and barrier islands alter their size, shape, location, and topography in reaction to erosive and accretive forces of wave action, storm surge, and rising sea levels. Each of these changes alters the ability of the coastal floodplain to protect inland areas from flooding.”). 217. See Heather Smith, Crude Awakening: As Keystone Opens in Texas, Neighbors Fight to Protect their Water, GRIST (Jan. 23, 2014), http://grist.org/climate-energy/oil-and-water-as-texas-keystone-pipe-opens- neighbors-organize-to-protect-their-aquifer/ (stating that increased litigation delay and may end proposed eminent domain projects) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 218. See Press Release, Jerry Patterson, Land Comm’r, Texas Gen. Land Office, West Galveston Island Beach Project Is Cancelled: Timing and Legal Issues from Court Decision Spells End for Project (Nov. 15, 2010), available at http://www.glo.texas.gov/glo_news/press_releases/2010/ NOVEMBER/West-Galveston-Island.pdf (“Patterson said a recent Texas Supreme Court opinion in a case brought forward by California-based Pacific Legal Foundation has muddied the legal waters enough to delay the beach project indefinitely.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 219. 370 S.W.3d 705 (Tex. 2012). NECESSARY CHANGE 587
Furthermore, cases in California in recent years have indicated, “acquiring property through eminent domain is an increasingly costly prospect for the government.”220 As another example, California is seeking to build a high-speed rail system, which could have “devastating, irreversible effects on the state’s environment,” and which will require at least separate partial takings, which could be prohibitively expensive.221 The financial feasibility of these projects, especially in the environmental context, remains an important factor to consider. There remains a logical fallacy to say that the individual bears the burden for society when their compensation is reduced due to general benefits.222 If the dunes had not been built, Karan would have suffered to a greater degree than most, as evidenced by Hurricane Sandy.223 In many cases, simply because a general benefit assists the public does not mean the value does not exist to the particular property owner, who may benefit disproportionately.224 If the taking of property for a windmill will lower energy costs or a local park will benefit the neighborhood by raising property values, the degree to which the condemnee
220. Paul Shigley, Eminent Domain Acquisitions Grow More Expensive, CALIFORNIA PLANNING & DEVELOPMENT REPORT (Jan. 30, 2008, 4:26 PM), http://www.cp-dr.com/node/1915 (“Courts have issued four recent court decisions regarding eminent domain that suggest that acquiring property through eminent domain is an increasingly costly prospect for the government.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 221. Joe Guzzardi, Judge Sends High-Speed Rail Plan Off the Tracks, LODI-NEWS SENTINEL (Jan. 4, 2014, 12:00 AM), http://www.lodinews.com/opinion/ columnists/joe_guzzardi/article_b2365b98- 2c0e-593b-8c93-7109fb544d94.html (“[T]he rail would have devastating, irreversible effects on the state’s environment, encourage further unsustainable population growth and, despite its huge cost, have no guarantee of ridership.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 222. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 526 (N.J. 2013) (explaining the requirement of providing “just compensation” to individuals whose property has been taken through eminent domain proceedings). 223. See id. at 527 (observing the protective nature of the dunes constructed to prevent property destruction). 224. See AM. JUR., supra note 7, § 324 (“A special benefit conferred on the remaining parcel may not be deducted from the value of the part taken, therefore, but it may be deducted from consequential or severance damages.”). 588 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) benefits may be equal or greater to that of the rest of the neighborhood. In contrast, opponents of the proposed change advocate for an emphasis in the word “just” in just compensation. 225 The landowner must be fairly and justly compensated for their loss, and should not bear the cost of society’s gain. 226 In addition, opponents in Beveridge v. Lewis noted:
The chance that land will increase in value as population increases and new facilities for transportation and new markets are created is an element of value quite generally taken into consideration in the purchase of land in estimating its present market value. This chance for gain is the property of the land-owner. If a part of his property is taken for the construction of the railway, he stands in reference to the other property not taken like similar property-owners in the neighborhood. His neighbors are not required to surrender this prospective enhancement of value in order to secure the increased facilities which the railroad will afford.227
In short, everyone in a neighborhood receives the benefit of the general benefits, but while neighbors’ property may appreciate in value, the same cannot be said of the landowner that lost their
225. See DellaPelle, supra note 151 (noting the premium paid for beachfront properties in the Harvey Cedars case); see also SINGER, supra note 23, at 677 (highlighting issues of justice and fairness as factors that have been considered in prior takings cases). 226. See Penn Cent. Transp. Co. v. New York, 483 U.S. 104, 148 (1978) (“[T]he Fifth Amendment's guarantee . . . [is] designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”) (quoting Armstrong v. United States, 364 U.S. 40, 49 (1960)). 227. Beveridge v. Lewis, 70 P. 1083, 1086 (Cal. 1902), overruled by Los Angeles Cnty. Metro. Transp. Auth. v. Cont’l Dev. Corp., 941 P.2d 809, 825 (Cal. 1997) (“On balance, and acknowledging that Continental’s position is not without some force, we overrule Beveridge, supra, 137 Cal. 619, to the extent it holds that only “special” benefits may be offset against severance damages.”). NECESSARY CHANGE 589 property to the partial taking.228 As a result, the neighbors get the general benefit in addition to the increased value, while the condemnee gets merely the increased value.229 However, as the California Supreme Court in Continental Development said, this argument fails because those neighbors do not also receive the severance damages that the condemnee receives, making the ultimate difference in benefits received insubstantial.230 Opponents against the proposed change have noted that it may be difficult to calculate with reasonable certainty the positive environmental general benefits.231 If the general benefits cannot be calculated non-speculatively, they would not be admitted into court, which would lead to the same result as before.232 Consequently, there would be no practical change from the adoption of the Harvey Cedars decision.233 One additional concern that the general benefits of a public project may be so great as to entirely offset any compensation owed to a condemnee, leaving a landowner with no financial recompense. 234 If so, the benefits would unfairly foreclose the just compensation award to which the landowner is
228. See Harvey Cedars, 70 A.3d at 526–27 (observing the protective benefits of the dune creation project and the simultaneous disadvantage to those whose property was taken as a result of the project). 229. See id. (describing the calculation of benefits provided to homeowners affected by partial takings). 230. See Continental, 941 P.2d 809, 820 (Cal. 1902) (“Continental’s equal protection argument is flawed in that it fails to account for a significant difference, in terms of the availability of compensation for the detrimental effects of the Green Line . . . . Continental is entitled to severance damages, whereas its neighbors are not.”). 231. See id. at 826 (discussing condemnee’s objection to a somewhat vague standard of what is to be considered reasonable). 232. See DellaPelle, supra note 151 (“[U]nless and until the benefit can be proven, as a reasonably calculable sum by objective market data, the mandate of the Karan court will not necessarily lead to lower condemnation awards.”). 233. See Harvey Cedars, 70 A.3d at 544 (“[T]he quantifiable decrease in the value of their property—loss of view—should have been set off by any quantifiable increase in its value—storm-protection benefits. The Karans are entitled to just compensation, a reasonable calculation of any decrease in the fair market value of their property after the taking.”). 234. See Spoto, supra note 123 (noting the Karan’s eventually settled for $1 of just compensation). 590 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) constitutionally entitled.235 If the landowner has their land taken from them and receives nothing tangible in return, there is a certain unjust quality at play. 236 Although Susette Kelo did receive compensation in the Kelo case, she described a similar plight to the one just described by stating, “My name is Susette Kelo and the government stole my home.”237 A landowner that loses part of their property without financial compensation in return might feel similarly. Despite this possibly unjust nature, the Harvey Cedars case eventually settled for $1, far less than the nominal $300 offered to the Karans.238 As a result, at least one court remains satisfied with nominal compensation, despite concerns stated above.239 In addition, it should be noted that the Constitution does not require just compensation to be paid in monetary forms by its very terms; the notion of benefits in itself constitutes compensation outside of currency. 240 This is why conceptual, although certain, general benefits should be considered and as an offset to real damages to the remaining property, because even though they are a more ephemeral concept than visible damages, general benefits still have real consequences and are calculable.241
235. See AM. JUR., supra note 7, § 338 (“Special benefits conferred on a property owner’s remaining property as a direct result of a taking may constitute just compensation”). 236. See U.S. CONST. amend. V (stating the constitutional prohibition against unjust takings compensation). 237. Susette Kelo, The Government Stole My Home, Policy Report, 31 CATO INSTITUTE (Mar./Apr. 2009), available at http://object.cato.org/policy- report/marchapril-2009/government-stole-home (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 238. See Spoto, supra note 123 (identifying the insignificant settlement amount of the Karan case). 239. See supra note 123 and accompanying text. 240. See AM. JUR., supra note 7, § 338 (“Special benefits conferred on a property owner’s remaining property as a direct result of a taking may constitute just compensation”). But see Paducah & Memphis R.R. Co. v. Stovall, 59 Tenn. 1, 5 (1873) (“In the case of Woodfolk v. The Nashville & Chattanooga Railroad Co., 2 Swan, 422, it was settled that the ‘just compensation’ of the Constitution was the fair value of the land appropriated, which must be actually paid in money, and can not be discharged in benefits or ameliorations.”). 241. See Borough of Harvey Cedars v. Karan, 70 A.3d 524, 544 (N.J. 2013) (explaining the necessity of using a compensation method that accurately identifies general benefits). NECESSARY CHANGE 591
VIII. Conclusion
Every state and the federal court should adopt the New Jersey Supreme Court’s holding in Harvey Cedars, which allows for just compensation in partial takings to be calculated according to the before-and-after method, mitigated by non- speculative and reasonably calculable general and special benefits.242 The applied effect of the change would be to lower economic costs for states and municipalities in creating environmentally friendly projects that benefit the general populace, and to recognize the benefits realized in practice by landowners of such projects.243 In addition, development of partial takings jurisprudence would allow the government to be better suited to take unpredictable and unforeseeable environmental concerns that may pop up in the future, without being forced to rely on property law developed in the 1800s, as is the case with Bauman.244 In the end, federal, state, and local jurisdictions will be in a better financial position to take partial tracts of land for the betterment of the public as a whole, in keeping with the fundamental public use doctrine that eminent domain demands.245
242. See id. at 543 (“The Borough should not have been barred from presenting all non-speculative, reasonably calculable benefits from the dune project . . . . Those benefits are part of the fair-market equation, regardless of whether they are enjoyed by others in the community.”). 243. See Barnhizer, supra note 190, at 295–97 (discussing the need for environmentally motivated takings actions). 244. See Bauman v. Ross, 167 U.S. 548, 563 (1897) (applying underlying property law principles to the Fifth Amendment’s Takings Clause). 245. See Barnhizer, supra note 190, at 297–99 (advocating for more aggressive takings actions based on the necessity of public planning and response to environmental concerns).
Moving Military Energy “Behind the Fence:” Renewable Energy Generation on U.S. Defense Lands
Cameron E. Tommey
Abstract
“The [Department of Defense] uses over 30,000,000 MegaWatt Hours (“MWH”) of electricity per year, at a cost of over $2 billion a year. Almost 98 percent of the electricity supplied to [Department of Defense] installations comes from the civilian market, which also makes it highly susceptible to the increasing spate of large-scale outages (caused by accidents, over-demand, as well as cyber- attack). Indeed, the Defense Science Board described the national power grid as ‘fragile and vulnerable,’ and noted that the reliance placed on it by the [Department] put ‘critical military and homeland defense missions at unacceptable risk of extended outage.’”
Fueling the Balance, Brookings Institute1
The United States Department of Defense stands as the world’s single largest consumer of energy—domestic consumption alone
Cameron Tommey ([email protected]) is a J.D. candidate at Washington & Lee University School of Law, May 2015, and a Senior Articles Editor for the Journal of Energy, Climate, and the Environment. Cameron would like to thank Professor Albert V. Carr for his invaluable support and guidance and to members of the Journal of Energy, Climate, and the Environment for their review and comments. 1. JERRY WARNER & P.W. SINGER, THE BROOKINGS INSTITUTION, FUELING THE “BALANCE:” A DEFENSE ENERGY STRATEGY PRIMER 3 (2009).
592 BEHIND THE FENCE 593 by the Department amounts to nearly one percent of the United States’ total energy consumption and nearly eighty percent of the energy consumed by the Federal Government. Although a cadre of statutes, Executive Orders, and agency priorities set high goals for the introduction of renewable energy into the Department’s portfolio, it has historically failed to meet both its target for reducing facility energy use and its target for renewables integration. This Note suggests moving the Department’s energy production “behind the fence,” fixing technology to place to increase security and reduce environmental and economic impacts. To do so, however, a mountain of challenges will have to be overcome, including federal permitting restrictions on new energy projects, high capital costs for increased generation, a number of technological challenges with emerging renewable energy sources, and the existing contracts with traditional energy producers. Ultimately, a comprehensive and expansive initiative that couples site-specific technologies with agency-wide coordination will help the Department both meet its statutorily mandated targets for energy efficiency and production and also effect positive change in the environmental impact of our nation’s single largest energy consumer.
Table of Contents
I. Introduction ...... 594 A. Background ...... 596 B. Politically Opportune ...... 600 II. Federal Action on Renewable Energy ...... 601 A. Legislation ...... 603 B. Executive Action ...... 605 III. Benefits of Renewable Energy to the ...... 606 Department of Defense ...... 606 A. Security ...... 608 B. Environmental ...... 609 C. Economic ...... 611 IV. Department Integration of Renewable to Date ...... 612 V. Fixing Technology to Place ...... 614 A. Case Study I: Biomass in the U.S. Northeast ...... 616 B. Case Study II: Solar in the U.S. Southwest ...... 618 C. Microgrids and Smart Grids ...... 620 D. Microgrids in the Military ...... 622
594 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
VI. Challenges and Recommendations ...... 623 A. Federal Permitting Restrictions ...... 624 B. Lack of Short Term Incentives ...... 625 C. Generation vs. Acquisition ...... 626 D. Shifting Land Management ...... 628 E. Technological Challenges...... 629 F. Existing Contracts ...... 630 VII. Conclusion ...... 632
I. Introduction
The Department of Defense (“DOD”) currently represents the world’s single largest consumer of energy, with a larger energy footprint from its daily activities than any public or private entity and more than 100 countries.2 Not only does this represent a significant expenditure for our nation’s defense budget, but it also highlights a sweeping opportunity to alter the face of energy consumption and conservation on a mass scale in the United States. 3 Pursuant to federal legislation, executive orders, and DOD policies and practices, the U.S. military has made steps toward developing more robust renewable energy standards for the agency as a whole and for individual military branches.4 With the roll out of the President’s Climate Action Plan in the summer of 2013, the military became a key piece of our nation’s shift towards cleaner, greener energy while also advancing energy security in an increasingly politically unstable global environment.5 In highlighting the nexus between energy consumption and a changing climate, the Climate Action Plan noted that “climate change is no longer a distant threat – we are
2. See id. at 2 (describing the energy usage of the DOD in relation to the entire federal government). 3. See id. (comparing the excessive energy usage of today’s military to the energy usage issues presented in the Civil War). 4. See infra Part II and accompanying text. 5. See WARNER, supra note 1, at 2 (“The long-term implications of this energy consumption on national security as a whole are manifold, from bolstering illiberal regimes that control oil reserves and indirectly financing terrorist groups to driving climate change that endangers global stability and the American economy.”).
BEHIND THE FENCE 595 already feeling its impacts across the country and the world.”6 This Note argues that the Department of Defense installations and bases represent the key piece of the puzzle in advancing a program of renewable energy sources for electricity generation and acquisition. In Part I, this Note reviews where the Department of Defense has focused its time and funding with regards to renewable energy to date.7 It then assesses where it could go with the remaining term of a President eager to integrate renewable technologies into the operations of the federal government.8 Part II reviews the various legislative, executive, and agency actions that place special requirements upon the DOD to consider a transition to renewable energy sources. 9 Part III summarizes the clear and significant benefits of renewable energy integration by the DOD, including increased mission security, positive environmental impacts, and economic incentives.10 After reviewing the progress of the DOD to date in Part IV, Part V considers the myriad benefits of decentralizing energy systems.11 Special attention will be paid to the untapped opportunity to use locally sourced and regionally appropriate renewables technologies12—in conjunction with Smart Grid and other developing transmission uses—to create a large-scale renewable energy portfolio for the federal military through use of small-scale generation.13 Finally, Part VI will highlight some of the major challenges to a rapid transition from traditional energy sources to
6. See EXECUTIVE OFFICE OF THE PRESIDENT, THE PRESIDENT’S CLIMATE ACTION PLAN 4, available at http://www.whitehouse.gov/sites/default/files/image/president27sclimateactionpl an.pdf (July 2013) [hereinafter CLIMATE ACTION PLAN] (adding the Department of Defense’s new goals and mechanisms for attaining renewable energy use across the Department, including wind, solar, biomass, and geothermal) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 7. See infra Part II and accompanying text. 8. See infra Part II and accompanying text. 9. See infra Part II and accompanying text. 10. See infra Part III and accompanying text. 11. See infra Part V and accompanying text. 12. See infra Part V for discussion of particular renewable electricity generation technologies that take advantage of regionally abundant resources to increase efficiency and decrease transportation costs. 13. See infra Part V and accompanying text.
596 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) more renewable forms of electricity generation and acquisition.14 Given the current funding opportunities, the private sector interest in renewables investment, and developing federal permitting structures to favor renewables, the time to capture the DOD’s renewable energy opportunity is now.15 Ultimately this paper endeavors to highlight the particular opportunity for “behind the fence” electricity generation—that is, electricity generated and used within the physical boundaries of a military installation.16 As later Parts discuss, however, a number of challenges stand in the way of facilitating this significant departure from historical and current practice; the transition to a renewable energy portfolio for our military will neither be instant nor simple.17
A. Background
The Department of Defense’s energy footprint makes it the world’s largest single consumer of energy—more than any other public or private entity and more than one hundred individual countries.18 Looking only at domestic energy consumption—both electricity and other fuels and uses—this amounts to nearly one percent of the United States’ total energy consumption and nearly eighty percent of the energy consumed by the Federal Government. 19 To put this in perspective, “the Department of Defense burns 395,000 barrels of oil per day—about as much as the entire country of Greece.”20 The same pattern of considerable energy consumption happens at the installation and base level as well. “The DoD uses over 30,000,000 MegaWatt Hours (“MWH”) of electricity per year, at an [annual] cost of over $2 billion.”21 Significantly, as recently as 2010, “[a]lmost 98 percent of the electricity supplied to [DOD]
14. See infra Part VI and accompanying text. 15. See infra Part VI and accompanying text. 16. See infra Part VI and accompanying text. 17. See infra Part IV and accompanying text. 18. See WARNER, supra note 1, at 1 (noting the duel issues presented by such massive energy demands: environmental and security). 19. See id. at 2 (adding that energy consumption per person in the United States has increased 57 percent in the last four decades). 20. Id. 21. Id. at 3.
BEHIND THE FENCE 597 installations comes from the civilian market,” leading to high susceptibility to large-scale outages resulting from accidents, weather events, increased demand, and new threats of cyber- attack.22 Recognizing the risks involved in procuring nearly 100 percent of its electricity needs from the civilian grid, the Defense Science Board described the national power grid as “fragile and vulnerable” and noted that “critical national infrastructure places critical military and Homeland defense missions at an unacceptably high risk of extended disruption.”23 Although much of this consumption falls within the broader categories of strategic defense, both internal and external studies of the Department of Defense’s energy use reveal that energy efficiency and a lack of comprehensive energy consumption plans are just as important as problems of electricity acquisition and generation.24 This Note endeavors to focus on the latter of these problems: the sources of energy acquisition by the U.S. military and the opportunities for the incorporation of renewable sources 25 to positively shift the strategic, environmental, and economic impacts of energy use.26
22. See id. (characterizing the military’s “exceptional appetite for energy, which is becoming untenable for our future security.”). 23. MORE FIGHT, LESS FUEL: REPORT OF THE DEFENSE SCIENCE BOARD TASK FORCE ON DOD ENERGY STRATEGY, OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS 3–4 (2008), available at http://www.acq.osd.mil/dsb/reports/ADA477619.pdf [hereinafter MORE FIGHT, LESS FUEL] (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 24. See WARNER, supra note 1, at 4 (noting that while energy self- sufficiency for bases is a worthy aim, the DOD’s approach has been ad hoc and does not address energy consumption by vehicles and operations); see also DEPARTMENT OF DEFENSE, OFFICE OF THE DEPUTY UNDER SECRETARY OF DEFENSE, INSTALLATIONS AND ENVIRONMENT, 0-3C82BA1, ANNUAL ENERGY MANAGEMENT REPORT, FISCAL YEAR 2012 (2013) [hereinafter 2012 ANNUAL ENERGY REPORT] (containing a detailed analysis of energy use by the Department of Defense in 2012 as well as a comprehensive assessment of energy initiatives across the Department). 25. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 35 (stating that currently, the DOD recognizes seven main technologies for renewable electricity generation: geothermal, ground source heat pumps, biomass, solar thermal, solar photovoltaic (PV), and wind). 26. See WARNER, supra note 1, at 1 (“This is not just a matter of recognizing the energy and climate issue on the threats side of the ledger. In order to drive actual programming and yield resources, a defined and realistic
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This area shares the criticism of lacking comprehensive oversight and coordination.27 Despite a strong increase in activity related to energy efficiency and consumption in the military, the overall impact remains “spotty and lacks a broad, cohesive strategy that cuts across the [DOD] as a whole. The programming tends to be ad-hoc and often focused on the lowest-hanging fruit.”28 Spending billions of dollars annually on energy acquisition, the DOD has the potential both to reduce these costs substantially through resource-neutral renewable sources 29 as well as infuse huge investments into new and developing technologies. 30 History has shown that military research and development can lead to breakthroughs in technology, in part because of the formidable budgets and research and development resources of the DOD.31 The challenge, however, lies in creating a targeted and sweeping program that ensures the efficacy of this
target finally needs to be enunciated for the Department of Defense in the energy usage realm.”). 27. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 5 (calling for “Department-wide integration of energy-informed analyses into decision- making and business processes.”); see also WARNER, supra note 1, at 6 (suggesting that the DOD designate a “point person” to research and compile an annual report for the Secretary of the DOD and Congress, reviewing progress towards annual and long-term goals and standardizing the reporting mechanisms). 28. WARNER, supra note 1, at 4 (noting that plans to push military bases to operate as “net zero,” for example, producing all energy necessary for base consumption, has to date only reached a small fraction of the total domestic installations). 29. See OFFICE OF ENERGY EFFICIENCY & RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY, 2012 RENEWABLE ENERGY BOOK 120 (2013) [hereinafter RENEWABLE ENERGY BOOK] (defining renewable energy sources and qualifying resource methods). Renewable electric energy sources are naturally replenishing but flow-limited. Id. They are virtually inexhaustible in duration but limited in the amount of energy that is available per unit of time. Id. Renewable energy resources include biomass, hydropower, geothermal, solar, wind, and ocean energy. Id. 30. See WARNER, supra note 1, at 6 (stating that the DOD has developed revolutionary technology in response to adversity in the past). 31. See Jeremy S. Scholtes, On Point for the Nation: Army and Renewable Energy, 34 ENERGY L.J. 55, 61 (2013) (noting that the various military branches have “acted as a crucible for social and technological advancement many times since their very inception.”).
BEHIND THE FENCE 599 research and development and facilitates technology flow to agencies and parties outside of the DOD.32 Myriad external factors at play push the Department to embrace renewable technologies domestically, including “acknowledgment of evolving cyber-attack capabilities across the globe that could impact [military] operations at installations . . . [and] the need to develop operational plans and sound infrastructure that will endure through changing environmental conditions.”33 Furthermore, the structure and reach of the Department of Defense makes it perhaps the most well positioned federal agency to move for sweeping changes in energy management.34 With more than 500 permanent installations overseas and in the United States, military lands “contain more than 300,000 buildings and 2 billion square feet of space.”35 That means [the DOD’s] footprint is 4 times that of Wal-Mart and 10 times that of the General Services Administration (“GSA”).”36 Together, these installations, comprising nearly 20 million acres, offer a “clear target for [the DOD] to promote energy efficiency and reduce energy costs,” often through alternative energy sources.37 Each
32. See id. at 101 (identifying Navy and Army practices which make a unified energy initiative difficult to create). 33. Id. at 61. 34. See WARNER, supra note 1, at 7 (providing reasons why the DOD is in a unique position among entities to effectuate a cleaner and more environmentally friendly energy policy). 35. See Energy Management and Initiatives on Military Installations Before the H. Readiness Subcomm. Of the H. Comm. On Armed Services, 111th Cong. 4 (2010) (statement of Dr. Dorothy Robyn, Deputy Under Secretary of Defense for Installations and Environment, U.S. Department of Defense) (outlining the size of the military complex). 36. See id. (stating that this analogy to the GSA is an important indicator of the relative size of the Department of Defense compared to the remaining entirety of the Federal Government). 37. See U.S. DEPARTMENT OF DEFENSE, OFFICE OF THE DEPUTY UNDER SECRETARY FOR INSTALLATIONS & ENVIRONMENT, BASE STRUCTURE REPORT, FISCAL YEAR 2010 BASELINE (A SUMMARY OF DOD’S REAL PROPERTY INVENTORY) 36–78, available at http://www.acq.osd.mil/ie/download/bsr/bsr2010baseline.pdf [hereinafter DOD’S REAL PROPERTY INVENTORY] (cataloguing all Department of Defense’s owned and managed lands in each state and territory) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also 2012 ANNUAL ENERGY REPORT, supra note 24, at 6 (calling facility energy management a “force multiplier” in the support of military readiness).
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DOD base or installation presents the unique opportunity to act as a lab of hyper-local technologies, using resources in regionally specific contexts.38 With all of these factors at the forefront of the minds of DOD leadership, steps have already been taken to coordinate among the military branches.39
B. Politically Opportune
The increase in attention given to environmental and climatic issues since President Obama took office could lead to the assumption that these are inherently Democratic issues; executive actions alone have led to some of the most significant advances in government sustainability in recent years. 40 A broader perspective of these issues, however, reveals strong bipartisan recognition of the threats—strategic, environmental, and economic—of waning fossil fuel resources and increasing global political complexity. 41 Given this political climate in Washington and a President keen on setting a legacy of environmentalism, the Department of Defense sits poised to initiate new measures now to set into motion long-term
38. See infra Part V for a discussion of regionally specific renewable sources, including case studies. 39. See WARNER, supra note 1, at 6 (“Part of achieving success is having the metrics on hand to implement measurable standards across the [Department] and know what type of progress (or not) is being made in usage on an annual basis.”); see also 2012 ANNUAL ENERGY REPORT, supra note 24, at 9–13 (listing high level officials in each military branch along with their respective titles and subordinate governance structure with regards to energy management). 40. See EXECUTIVE OFFICE OF THE PRESIDENT, THE PRESIDENT’S CLIMATE ACTION PLAN 4, available at http://www.whitehouse.gov/sites/default/files/image/president27sclimateactionpl an.pdf (July 2013) [hereinafter CLIMATE ACTION PLAN] (“In 2009, President Obama made a commitment to reduce U.S. greenhouse gas emissions in the range of 17 percent below 2005 levels by 2020.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also infra Part II and accompanying discussion of Executive Orders and Memoranda. 41. See WARNER, supra note 1, at 5 (“When asked to name a key issue to solve, the one commonality between GOP, swing, and Democratic primary voters in the 2008 election was to cut America’s dependency on foreign oil.”).
BEHIND THE FENCE 601 investment in developing energy technologies and establish renewable energy standards.42 Indeed, the White House Climate Action Plan released in the summer of 2013 directly highlights the incorporation of renewable energy into Department of Defense strategies and the DOD’s own Annual Energy Management Report singles out renewables as one of the four core principles of a balanced, secure energy plan.43 With new federal regulations attacking some forms of fossil fuel-based energy generation, such as forthcoming Environmental Protection Agency (“EPA”) limits on carbon emissions from coal facilities, the DOD will advantage itself by finding alternative sources to replace these fuels relative to the cost of retrofitting into compliance.44
II. Federal Action on Renewable Energy
The renewable-friendly political climate discussed above has led to a spectrum of actions—legislation, executive orders, and agency initiatives—to position the federal government as a laboratory for the development and promulgation of renewable energy technologies. 45 Many of these federal initiatives, in
42. See CLIMATE ACTION PLAN, supra note 40, at 5 (recognizing the numerous steps already taken by President Obama’s administration by “highlight[ing] progress already set in motion by the Obama Administration to advance these goals and set[ing] forth new steps to achieve them.”). 43. See id. at 7 (summarizing the aggressive renewable goals of the Department and the significance of these goals given the Departments position as “the single largest consumer of energy in the United States . . . .”); see also 2012 ANNUAL ENERGY REPORT, supra note 24, at 6 (summarizing the four core principles as: reducing demand, expanding supply, enhancing security, and advancing new technologies). 44. See EPA Proposes Carbon Pollution Standards for New Power Plants/ Agency takes important step to reduce carbon pollution from power plants as part of President Obama’s Climate Action Plan, U.S. ENVIRONMENTAL PROTECTION AGENCY NEWSROOM (Sept. 20, 2013), http://yosemite.epa.gov/opa/admpress.nsf/0/da9640577ceacd9f85257beb006cb2b6 !OpenDocument (announcing the new rulemaking with a mission to “cut carbon pollution from new power plants in order to combat climate change and improve public health”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also CLIMATE ACTION PLAN, supra note 40, at 5 (heralding “tough new rules to cut carbon pollution” in line with the Administration’s goals). 45. See Congressional Research Service, Renewable Energy and Energy Efficiency Incentives: A Summary of Federal Programs, 1–2 (Mar. 22,
602 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) tandem with a collection of state initiatives, have created an environment in which public-private partnerships can thrive.46 For example, the Department of Energy’s Office of Renewable Energy and Efficiency (“DOE-OREE”) and the National Renewable Energy Laboratory (“NREL”) cultivate private sector appetite for renewable energy development. 47 DOE-OREE supports deployment of new renewable technologies and encourages energy efficiency initiatives. 48 Similarly, NREL, another division of the Department of Energy (“DOE”), acts as the government’s main laboratory for new and emerging renewable energy technologies.49 These various agencies work together to develop renewable energy solutions for the federal body and beyond.50
2013) (discussing numerous actions toward the modern federal approach to renewable energy technology) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 46. See NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, §1603 TREASURY GRANT EXPIRATION: INDUSTRY INSIGHT ON FINANCING AND MARKET IMPLICATIONS, at iii (June 2012) (“The §1603 Program entitled project developers to receive 30% of a project’s capital cost in the form of a cash payment, thus freeing developers of having to rely on tax equity investors to monetize the tax credits.”). 47. See NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, Leadership (last visited Feb. 13, 2015), http://www.nrel.gov/about/leadership.html (identifying NREL as a sub-unit of the DOE-OREE) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also infra notes 49–50 and accompanying text (discussing the aligned roles of NREL and the DOE-OREE). 48. See OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEP’T OF ENERGY, About Us, http://energy.gov/eere/about-us (last visited Apr. 12, 2014) (noting that DOE-OREE “accelerates development and facilitates deployment of energy efficiency and renewable energy technologies and market- based solutions that strengthen U.S. energy security, environmental quality, and economic vitality”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 49. See NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, About NREL (last visited Apr. 12, 2014), http://www.nrel.gov/about/overview.html (describing its work as developing “renewable energy and energy efficiency technologies and practices, advance[ing] related science and engineering, and transfer[ing] knowledge and innovations to address the nation's energy and environmental goals”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 50. See NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, National Laboratory Impact Initiative Team (last visited Apr. 12, 2015), http://energy.gov/eere/national-laboratory-impact-initiative-team (outlining a DOE-OREE program to “[i]ncrease and enhance laboratory-private sector
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The following sections will look at specific legislative and Executive actions that have pushed for further renewable energy integration and now set goals—some mandatory, others aspirational—applicable to the Department of Defense.
A. Legislation
A collection of legislative actions has created various goals for Federal agencies in terms of sustainability and integration of renewable energy.51 The result is a somewhat confusing array of definitions and benchmarks. The Energy Policy Act of 2005 (“EPACT05”) 52 directs federal agencies to consume three percent of their electrical energy from renewable sources for the years 2007 through 2009, increasing progressively to seven and one-half percent in 2013.53 According to EPACT05, progress towards these goals should proceed as “economically feasible and technically practicable.”54 Adding to this, the Energy Independence and Security Act of
relationships[s],” “[i]ncrease and streamline access to national laboratory capabilities[,]” and “[d]emonstrate the value of lab-developed science and technology”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, Missions and Programs (last visited Apr. 12, 2015), http://www.nrel.gov/about/mission-programs.html (identifying NREL as “the only federal laboratory dedicated to research, development, commercialization, and deployment of renewable energy and energy efficiency technologies”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 51. See OFFICE OF ENERGY EFFICIENCY AND RENEWABLE ENERGY, DEP’T OF ENERGY, Laws and Requirements (last visited Apr. 12, 2015), http://energy.gov/eere/femp/laws-and-requirements-0 (describing the Federal Energy Management Program which “analyzes energy management legal authorities, develops guidance documents, and publishes notices and rules” necessary to support agency compliance with numerous federal energy laws and requirements) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see generally Congressional Research Service, supra note 46 (cataloging numerous federal goals and citing underlying legislative authorities). 52. 42 U.S.C. §§ 15801–16524 (2012) [hereinafter EPACT05]. 53. See id. § 15852 (establishing a number of renewable energy priorities for the entire federal government). 54. Id.
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2007 (“EISA07”)55 introduced a required reduction in fossil fuel use in new and renovated buildings by fifty-five percent in 2010, increasing to one hundred percent in 2030. 56 An important qualifier for this requirement carried over from Executive Order 13423, which stated that at least half of the renewable energy contributing towards EISA07 goals must come from “new” sources.57 Both of these legislative sources of renewable energy goals emphasize a preference for on-site generation facilities, which can contribute both to production efficiency and supply security.58 From 2009 through 2013, the Department of Defense fell short of its EISA07 mandated energy intensity goals.59 Also, the Department of Defense failed to attain its 2013 EPACT05 goal for renewable electricity consumption: the DOD consumed 5.0% of its electricity from renewable sources, short of its 7.5% target.60 In pursuing EISA07 targets, the DOD approached the annual goal— a 24% reduction in facility energy intensity—with a 17.2% reduction in energy consumer per gross square foot of facility space.61 One area of promising development—the production of electric energy from renewable sources—revealed that 11.8% of the total facilities electricity consumption in 2013 came from
55. Pub. L. No. 110-140, 121 Stat. 1492 (codified at 42 U.S.C. §§ 17001–17386 (2012)) [hereinafter EISA07]. 56. See 42 U.S.C. § 6834(a)(3)(D)(i)(I) (2012) (displaying a timetable for reduction in federal fossil fuel consumption); see also 42 U.S.C. § 17131 (2012) (permanently authorizing a financing vehicle called Energy Savings Performance Contracts (ESPCs) which allow for a combination of appropriated funds and private funds). 57. See Exec. Order No. 13,423, 77 Fed. Reg. 17 (Jan. 25, 2007) (defining a “new” source as coming from a renewable energy generator coming into service after January 1, 1999). 58. See 42 U.S.C. § 15852 (offering double renewable energy credits for on-site generation); see also 42 U.S.C. § 6834 (requiring solar hot water technology to provide “not less than 30 percent of the hot water demand for each new Federal building or Federal building undergoing a major renovation” if “lifecycle cost-effective”). 59. See OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF., DEP’T OF DEF., 0-3C82BA1, ANNUAL ENERGY MANAGEMENT REPORT, FISCAL YEAR 2013, 19 (2014) (showing graphically in figure 3-4 Department of Defense performance relative to EISA07 goals). 60. See id. at 7 (charting “FY 2013 DoD Progress Toward Facility Energy and Water Goals” in table 1-1). 61. See id. (marking DOD progress in reduction of energy consumption).
BEHIND THE FENCE 605 renewable energy.62 This shows progress towards the goal of 25% in 2025.63
B. Executive Action
In a broad inclusion of all federal agencies, Executive Order 13423—Strengthening Federal Environmental, Energy, and Transportation Management—called for improvements in energy efficiency and set long terms goals with annual benchmarks.64 In part, the Executive Order called for agencies to:
(a) improve energy efficiency and reduce greenhouse gas emissions of the agency, through reduction of energy intensity by (i) 3 percent annually through the end of fiscal year 2015, or (ii) 30 percent by the end of fiscal year 2015, relative to the baseline of the agency’s energy use in fiscal year 2003; (b) ensure that (i) at least half of the statutorily required renewable energy consumed by the agency in a fiscal year comes from new renewable sources, and (ii) to the extent feasible, the agency implements renewable energy generation projects on agency property for agency use.65
In the summer of 2013, President Obama released a comprehensive Climate Action Plan, outlining the
62. See id. at 33 (noting that the “EPAct 2005 goal measures total renewable electricity consumption as a percentage of total facility electricity consumption.”). 63. See id. at 7 (reflecting DOD 2013 performance against 2025 goals). 64. See Exec. Order No. 13,423, 77 Fed. Reg. 17 (Jan. 25, 2007) (asserting goals after declaring general policy for federal conduct to occur in “an environmentally, economically and fiscally sound, integrated, continuously improving, efficient, and sustainable manner”). 65. See id. (defining “new renewable sources’’ as only those “placed into service after January 1, 1999” and ‘‘renewable energy’’ as “produced by solar, wind, biomass, landfill gas, ocean[,] . . . geothermal, municipal solid waste, or new hydroelectric generation capacity . . . .”) (emphasis added); see also Executive Order No. 13,514 (Oct. 5, 2009) (regarding federal agency greenhouse gas emissions).
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Administration’s vision for addressing climate change via the actions of the government and, in particular, federal agencies.66 While the overall goals of the Climate Action Plan focused on combatting climate change across sectors and markets, some of the most tangible goals set forth by the Administration came in the form of promoting American leadership in renewable energy development. 67 In order to meet a goal of doubling renewable energy production by 2020, the Climate Action Plan proposed to issue permits for ten Gigawatts of renewable energy on public lands by 2020.68 This includes a commitment by the Department of Defense to deploy three Gigawatts of renewables on military installations by 2025. 69 These goals will be analyzed more thoroughly below.70
III. Benefits of Renewable Energy to the Department of Defense
The transition from traditional, fossil fuel sources of electricity generation carries numerous advantages, both in the civilian world and in the military. 71 The recognition of these benefits has spread from a small section of the environmental
66. See CLIMATE ACTION PLAN, supra note 40, at 5 (describing a “broad-based plan to cut the carbon pollution that causes climate change and affects public health”). 67. See id. at 4–6 (“Climate change represents one of our greatest challenges of our time, but it is a challenge uniquely suited to America’s strengths. . . To ensure America’s continued leadership position in clean energy, President Obama has set a goal to double renewable electricity generation once again by 2020.”). 68. See id. at 7 (summarizing the progress towards previous presidential goals of renewable energy goals on public lands); see also infra Part VI and accompanying text (discussing emerging issues of public land management among federal agencies). 69. See id. (classifying the Department of Defense as the “single largest consumer of energy in the United States”). 70. See infra Part VI and accompanying text (discussing hurdles to federal renewable energy goal accomplishment). 71. See CLIMATE ACTION PLAN, supra note 40, at 5 (commenting on interests pertaining to the general public in climate change and health); see also DEPARTMENT OF DEFENSE, supra note 59, at 33 (noting the DOD’s interest in cost-efficiency as well as energy security).
BEHIND THE FENCE 607 community to a much wider spectrum of the country.72 And given the size and distribution of domestic military installations, such benefits are multiplied across the largest federal agency. 73 Furthermore, the technology transfer from the DOD to other civilian applications stands as an additional benefit of aggressive and rapid development of renewable energy technologies in military settings.74 A Memorandum of Understanding between the DOE and DOD placed strong focus on the potential benefits of a transition to renewable energy to the United States military.75 In doing so, the DOD may “improve energy security and operational effectiveness, reduce greenhouse gas (“GHG”) emissions in support of U.S. climate change initiatives, and protect the [DOD] from energy price fluctuations.”76 These three broad benefits—
72. See Ned Resnikoff and Amanda Sakuma, The Largest Climate March in History, MSNBC (Sept. 21, 2014), http://www.msnbc.com/msnbc/largest-climate-march-history-kicks-new-york# (stating that “[m]ore and more people are seeing how climate change affects them” as stated by one interviewee); see also ENVTL. PROT. AGENCY, Renewable Energy (last updated Aug. 13, 2014), http://www.epa.gov/statelocalclimate/state/topics/renewable.html (counting the benefits of renewable energy to include “[g]enerating energy that produces no greenhouse gas emissions from fossil fuels and reduces some types of air pollution[,] [d]iversifying energy supply and reducing dependence on imported fuels[,] [and] [c]reating economic development and jobs”). 73. See NAT’L RENEWABLE ENERGY LAB., DEP’T OF ENERGY, Department of Defense Energy Programs (last updated Jan. 20, 2015), http://www.nrel.gov/defense/projects.html (asserting that “energy efficiency and renewable energy strategies can be replicated across the DOD”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 74. See id. (suggesting that DOD renewable energy advances shift to “other federal agencies, setting the stage for broad market adoption”). 75. See Memorandum of Understanding between The U.S. Department of the Energy and The U.S. Department of Defense 1–2 (July 22, 2010), available at http://www.energy.gov/sites/prod/files/edg/media/Enhance- Energy-Security-MOU.pdf [hereinafter DOE Memorandum of Understanding] (including in its purpose “to strengthen coordination of efforts to enhance national energy security, and demonstrate Federal Government leadership in transitioning America to a low carbon economy.”). 76. Id.; see also ENVTL. AND ENERGY STUDY INST., Fact Sheet: DoD’s Energy Efficiency and Renewable Energy Initiatives 1 (July 2011), available at http://files.eesi.org/dod_eere_factsheet_072711.pdf (outlining major energy efficiency and renewable energy initiatives underway by the Department of Defense, Army, Navy, Marine Corps, and Air Force) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT).
608 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) security, environmental, and economic—are analyzed individually below.
A. Security
A domestic transition to renewable energy sources will contribute to long-term security of U.S. military interests. 77 Working towards shifting base and installation electricity generation to renewable sources and away from fossil fuel sources will lessen the dependence on foreign supplies of these resource extractive fuels.78 One report calling for a more comprehensive military energy plan points out, “[m]oving the [Department of Defense] away from reliance on petroleum will also ultimately address the long-standing irony” of sourcing our military energy needs from conflict regions.79 Aside from reducing the need for conflict intervention to preserve fossil fuel sources, focusing energy acquisition on local sources of fuels reduces the risk of terroristic disruptions of energy to domestic military installations. 80 The DOD acts in accordance with specific legislative requirements to reach what it calls “energy security.” 81 Essentially, the military must work towards “having assured access to reliable supplies of energy and
77. See DOE Memorandum of Understanding, supra note 75, at 2 (defining energy security as “having assured access to reliable supplies of energy and the ability to protect and deliver sufficient energy to meet operational and Installation energy needs” and considering energy efficiency “as a force multiplier, increasing the range and endurance of forces”). 78. See Renewable Energy, supra note 73 (“[R]educing energy costs, decreasing reliance on foreign oil and increasing energy security is part of the DOD mission.”). 79. See WARNER, supra note 1, at 1 (adding that a shift away from foreign oil will “give our military forces greater freedom of maneuver and reduced lines of communication across the entire spectrum of warfare from Expeditionary Operations to Disaster Relief and Humanitarian Operations.”). 80. See id. at 6 (suggesting a commission should be tasked with looking at each step in the process of energy development, acquisition, and generation “to determine energy security implications of issues such as import dependency, rare metals mining, and bio-based materials”). 81. See 10 U.S.C. § 2924 (“In selecting facility energy projects that will use renewable energy sources, pursuit of energy security means the installation will give favorable consideration to projects that provide power directly to a military facility or into the installation electrical distribution network.”).
BEHIND THE FENCE 609 the ability to protect and deliver sufficient energy to meet mission essential requirements.”82 As the department mandate states, the driving force behind energy security is found in “mission essential” considerations.83 As described by the Office of the Deputy Under Secretary of Defense for Installations and Environment, this goal of energy security manifests as three key objectives.84 First, the development of more energy-efficient facilities, investment in economical energy sources—including alternative energy—and considerations across the DOD of energy use and conservation support the energy security of the Department of Defense’s mission and assets. 85 Second, the Department recognizes that this mandate requires promotion of energy security of non-military infrastructure, “to monitor energy- related dependencies and promote the restoration and resilience” of other public and private sector equities.86 Finally, technological innovation must drive the Department to achieve the security of future defense forces and missions.87
B. Environmental
Some critics may conclude that a transition to renewable energy represents the narrow goals of environmental groups. But the looming potential realities of climate change and finite resources have caught the attention of organizations and agencies seemingly removed from the environmental dialogue. The military itself has acknowledged climate change as a real and
82. See id. (stating that “facility energy projects . . . should be prioritized to provide power for assets critical to mission essential requirements on the installation in the event of a disruption in the commercial grid”). 83. See id. (defining energy security relative success in mission essential requirements). 84. See 2012 ANNUAL ENERGY REPORT, supra note 24 (emphasizing that these key objectives span “across the Department”). 85. See id. (adding a recommendation that energy-informed analyses become integrated into all levels of decision making and business processes within the Department). 86. See id. (listing such entities as other federal departments and agencies, state and local governments, and private sector partners). 87. See id. at 5–6 (noting the need for support from both various Department subdivisions—Science, Technology, Engineering, and Environmental—as well as resources and expertise across the Government and the private sector).
610 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) pressing threat both to our society as a whole and to the ongoing operations of the military specifically.88 A military advisory board recently stated that the “nature and pace of climate change being observed today and the consequences projected by the consensus scientific opinion are grave and pose equally grave implications for our national security.”89 The Department of Defense’s own Quadrennial Defense Review noted:
Assessments conducted by the intelligence community indicate that climate change could have significant geopolitical impacts around the world, contributing to poverty, environmental degradation, and the further weakening of fragile governments . . . . While climate change alone does not cause conflict, it may act as an accelerant of instability or conflict, placing a burden to respond on civilian institutions and militaries around the world.90
Therefore, any effort by the DOD and its component branches will “help to reduce greenhouse gas emissions and protect our natural resources in order to slow, stabilize, or reverse climate change.”91
88. See On Point for the Nation, supra note 31, at 58–59 (2013) (noting the national security implications of climate change). 89. See MILITARY ADVISORY BD., THE CNA CORP., NATIONAL SECURITY AND THE THREAT OF CLIMATE CHANGE 1 (2007), available at http:// www.cna.org/sites/default/files/National%20Security%C20and%C20the%C20Thr eat%C20of%C20Climate%C20Change%-̈%20Print.pdf (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 90. Department of Defense, Quadrennial Defense Review Report 85 (Feb. 2010) [hereinafter QDR 2010], available at www.defense.gov/qdr/images/QDR_as_of_ 12Feb10_1000.pdf (emphasis added) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 91. See On Point for the Nation, supra note 31, at 59 (positing that the breadth and depth of the military’s national presence can begin to effect change across industries, leading to more investment in renewable technologies); see also Stan Alcorn, Why The Military Is Pushing to Green the Government, FAST COMPANY (Oct. 10, 2013, 11:26 AM), available at http://www.fastcoexist.com/3019332/heres-an-idea/why-the-military-is-pushing- to-green-the-government (explaining how the Department of Defense must “be onboard” in order to meet the President’s goal of having 20% of the Federal
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As the Climate Action plan pointed out, the military has an important role to play in our nation’s progress in reducing greenhouse gas emissions association with traditional fossil fuel use. 92 However, given the varied and broad benefits which renewables can offer the DOD, a comprehensive and strategic plan must guide agency-wide actions and efforts.
C. Economic
Across the board, federal agency budgets have steadily declined while energy costs of all forms continue to fluctuate. At the same time, the costs associated with various renewable energy technologies decrease as innovation and development drive market competition.93 For example, “the average price of a completed [solar photovoltaic] system has declined by more than 40%” in the last three years.94 Similar trends have occurred in other renewable energy generation fields.95 The ability of the DOD to sign long- term contracts for these developing technologies allows it to hedge against volatile energy costs. 96 The economic
Government’s energy come from renewable sources by 2020) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 92. See CLIMATE ACTION PLAN, supra note 40 and accompanying text. 93. See RENEWABLE ENERGY BOOK, supra note 29, at 4 (noting that “in the United States, renewable electricity has been capturing a growing percentage of new capacity additions during the past few years”). In 2012, renewable electricity accounted for more than 56% of all new electrical capacity installations in the United States—a large change from 2004 when all renewable electricity captured only 2% of new capacity additions. Id. 94. SOLAR ENERGY INDUS. ASS’N, ENLISTING THE SUN: POWERING THE U.S. MILITARY WITH SOLAR ENERGY 7 (2013) [hereinafter ENLISTING THE SUN]. 95. See Silvio Marcacci, Analysis: 50% Reduction in Cost of Renewable Energy Since 2008, CLEANTECHNICA (Sept. 11, 2013), available at http://cleantechnica.com/2013/09/11/analysis-50-reduction-in-cost-of-renewable- energy-since-2008/ (reviewing reports of lower capital costs for renewable energy technologies across all types between 2008 and 2012). The report found that some sources, such as wind and solar, are “now cost-competitive with many fossil fuel generation sources at an unsubsidized [levelized cost of energy], even before factoring in externalities like pollution or transmission costs.” Id. 96. See ENLISTING THE SUN, supra note 94, at 9 (“the military signs a contract to purchase the energy produced by the solar installation at a price that is below local utility rates, which can save the DOD and taxpayers millions of dollars over the life of the system”).
612 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) considerations will be analyzed more fully in Part VI which considers some challenges of a transition away from traditional energy suppliers in an effort to boost renewable energy consumption.
IV. Department Integration of Renewable to Date
The military services have demonstrated a willingness to be early adopters of new technologies and enablers of renewable and alternative energy projects. [T]hey work towards net zero installations, adopt advanced metering technologies, investigate microgrid technologies, and partner with the private sector to develop wind, solar, geothermal and waste-to-energy systems, just to name a few.97
Despite this clear Congressional statement of confidence in the DOD’s ability to achieve rapid integration of renewable energy technologies, the on-the-ground reality reveal this process easier said than done. A patchwork of legislative mandates, executive orders, and internal agency initiatives has created a somewhat opaque goal for the Department of Defense. 98 The legislative sources described above, in fact, create conflicting long-term goals in terms of the adoption of renewable energy sources, including different definitions of qualifying electricity sources.99 While EPACT05 and EISA07 apply broadly across the federal government, specific language in Title 10 of the U.S. Code
97. Energy Management and Initiatives on Military Installations: Hearing Before the H. Readiness Subcomm. Of the H. Comm. On Armed Services, 111th Cong. 1 (2010) (opening statement of Hon. Solomon P. Ortiz, A Representative from Texas, Chairman, Readiness Subcommittee). 98. See Part II, infra and accompanying text. 99. Compare EPACT05, supra note 52, at § 203 (defining qualifying sources as “electric energy generated from solar, wind, biomass, landfill gas, ocean (including tidal, wave, current, and thermal), geothermal, municipal solid waste, or new hydroelectric generation capacity achieved from increased efficiency or additions of new capacity at an existing hydroelectric project”), with EISA07, supra note 55, at § 803(a)(4) (defining the term “renewable energy project” as one generation commercial electricity from: solar, wind, geothermal, ocean, biomass (as defined by EPACT05), landfill gas, or Alaska small hydroelectric power”).
BEHIND THE FENCE 613 requires further specific actions by the Department of Defense.100 The renewable energy goal found there measures the total renewable energy (electric and non-electric) production and procurement as a percentage of the total facility electricity consumption.101 From this, the Code sets a goal of fifteen percent renewables by 2018, increasing to twenty-five percent by 2025.102 Additionally, selected service branches have established independent goals of installing one gigawatt of renewable energy on or near their installations.103 The DOD’s most recent Annual Report on energy management outlines the progress made towards these goals.104 Looking broadly, in fiscal year 2013 the DOD failed to meet both its target for reducing facility energy use and its target for renewable energy consumption. 105 Additionally, in its goal of attaining twenty-five percent renewable source generation by 2025, the DOD reached 11.8% in 2013. 106 This data can be somewhat misleading, however, because of large variances between individual DOD branches. For example, the Marine Corps and Air Force have exceeded the EPACT05 goals of renewable energy consumption (11.7% and 8% respectively) while the Army and Navy have fallen short (1.1% and 1.7% respectively). 107 Conversely, the Navy has led the field in
100. See 10 U.S.C. § 2911(e) (mentioning specific energy production targets and establishing interim goals for FY 2018). 101. See 10 U.S.C. § 2911(e)(2) (describing interim goals to be established for FY 2018). 102. See 10 U.S.C. § 2911(e) (noting production requirements for FY 2025). 103. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 31 (including various target years for branch-specific attainment). 104. See DEP’T OF DEF., OFFICE OF THE DEPUTY UNDER SEC’Y OF DEF., INSTALLATIONS AND ENVIRONMENT, 0-3C82BA1, ANNUAL ENERGY MANAGEMENT REPORT, FISCAL YEAR 2013 (June 2014) (containing a detailed analysis of energy use by the Department of Defense in 2013 as well as a comprehensive assessment of energy initiatives across the Department). 105. See id. at 7, D-1 (noting a 17.2% reduction in facility energy use towards a goal of 24%, and total renewable consumption of 5% out of the goal of 7.5%). 106. See id. (reporting Department of Defense energy produced from renewable sources in fiscal year 2013). 107. See id. (showing the performance gap between branches).
614 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) renewable energy production, producing a total of 26.6% of total facility electricity consumed from renewable sources.108 As later sections of this Note will look at the specific fuels used in various renewable energy applications, it is worth noting the dominant fuel types used to date by the DOD.109 Although solar (photovoltaic and thermal) comprise the largest portion of installation renewable energy projects by number of projects, the largest contributor to overall energy generation comes from geothermal projects. 110 One project—the Navy’s China Lake geothermal power plant in California—supplies nearly half of all of the DOD’s renewable energy production.111 Large generation sites such as this may skew the overall spread of renewable energy generation within the DOD. But these projects also make the most significant advances to reaching statutory and agency benchmarks.112
V. Fixing Technology to Place
As noted above, both legislative mandates and agency policies favor on-site generation versus mere acquisition from outside renewable generators. 113 This method encourages both the utilization of local resources and the technologies that have
108. See id. (listing the total renewable energy produced or procured as a percentage of total facility energy for the Department of Defense). It is important to note that almost all of the Navy’s qualifying renewable electricity comes from the large China Lake geothermal project, discussed below. Id. at 37. 109. See infra Part V and accompanying text. 110. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 35 (providing, in Figure 4-3, a graphical breakdown of renewable energy supply mix by technology type). 111. See id. (listing the top eleven sources of renewable energy generation, totaling nine major projects generating greater than 100 BBtu and approximately four-hundred and fifty smaller projects generating less than 100 BBtu electricity). 112. See id. at 37 (highlighting a 6.2% decrease in electricity generation capacity in FY2012). “Although there have been numerous improvements resulting in more efficient use of the geothermal resource at China Lake over the past 25 years, a decline in power production is typical for a liquid-dominated geothermal resource with long‐ term continuous liquid production.” Id. 113. See supra Part IV and accompanying text.
BEHIND THE FENCE 615 been developed to capture those resources.114 With each year, the spectrum of renewable energy technologies broadens; new and more efficient technologies continue to come into the market, allowing for some form renewable energy to be best suited to any particular geographic area. Given the near-ubiquitous presence of U.S. military bases and installations across the country, the Department of Defense is positioned to take advantage of regionally suited renewable energy technologies to meet its electricity generation needs.115 For example, a biomass energy facility located in a region dominated by forested lands already produces the secondary wood wastes necessary for biomass generation—the tree tops and bark from harvesting and mill waste from milling. 116 Woody biomass energy production uses these products to generate electricity.117 Therefore, an existing market can be sustained or grown while closing the loop on one of the waste products of timber processing. Similarly, a region rich with geothermal resources118 will create what amounts to neutral supply chains, taking advantage of the resource in-situ.119
114. U.S. DEP’T OF ENERGY, THE POTENTIAL BENEFITS OF DISTRIBUTED GENERATION AND RATE-RELATED ISSUES THAT MAY IMPEDE THEIR EXPANSION: A STUDY PURSUANT TO SECTION 1817 OF THE ENERGY POLICY ACT OF 2005 ii (2007) [hereinafter DOE DISTRIBUTED GENERATION STUDY] (noting that the implementation of Section 210 of the Public Utilities Regulatory Policy Act of 1978 “sparked a new era of highly energy efficient and renewable [distributed generation] for electric utility system applications”). 115. See DOD’S REAL PROPERTY INVENTORY, supra note 38, at 36–78 (providing a detailed list of the nearly 20 million acres of DOD’s owned or managed lands in the United States). 116. See NREL Biomass Maps, NATIONAL RENEWABLE ENERGY LABORATORY [hereinafter NREL Biomass Maps], http://www.nrel.gov/gis/biomass.html (providing county-level maps of the availability of primary and secondary mill wastes to be used in biomass electricity production) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 117. See Biomass Energy Basics, NATIONAL RENEWABLE ENERGY LABORATORY, http://www.nrel.gov/learning/re_biomass.html (outlining the technical basics of biomass electricity generation) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 118. See RENEWABLE ENERGY BOOK, supra note 29, at 4 (including a map of geothermal resources in the United States). 119. Geothermal Technologies, NATIONAL RENEWABLE ENERGY LABORATORY (last updated Aug. 28, 2014), http://www.nrel.gov/geothermal/ (summarizing the mechanics of geothermal energy) (on file with the
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Fixing renewable technologies to a geographic place has produced some of the most successful projects to date. 120 In addition to the large China Lake geothermal power plant in California, numerous other geothermal projects have tapped rich geothermal resources with the help of analyses by other federal agencies. 121 Similarly, branch projects in the Southeast and Northeast—historically timber rich regions—make biomass one of the most viable forms of renewable energy production.122 By using local resources, the DOD can both ensure the security of its energy supply chains as well as approaching the goals of producing all energy “behind the fence.”
A. Case Study I: Biomass in the U.S. Northeast
Numerous federal agencies are working on increasing the foundational knowledge of renewable energy resources and potential in the United States.123 The DOE’s National Renewable Energy Laboratory (“NREL”) has completed extensive mapping projects to identify regions where certain renewable energy technologies would be best suited. 124 To ground-truth these
WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT); see also Leslie Blodgett, Geothermal Visual: Power Capacity and Potential at California Geothermal Fields, RENEWABLE ENERGY WORLD (Feb. 7, 2014) http://www.renewableenergyworld.com/rea/blog/post/2014/02/geothermal-visual- power-capacity-and-potential-at-california-geothermal-fields?cmpid=WNL- Wednesday-February12-2014 (providing data of geothermal “resource rich” regions) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 120. See supra Part IV and accompanying text. 121. See RENEWABLE ENERGY BOOK, supra note 29, at 4 (including a map of geothermal resources in the United States). 122. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 35 (highlighting biomass projects in Georgia and Kentucky as two of the top ten renewable energy-producing sites nationally). 123. See Energy Research Knowledge Center, United States, STRATEGIC ENERGY TECHNOLOGIES INFORMATION SYSTEM (last visited Feb. 15, 2015), http://setis.ec.europa.eu/energy-research/country/united-states (describing the various agencies involved in energy resource in the United States) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 124. See generally United States Department of Energy, Research, NATIONAL RENEWABLE ENERGY LABORATORY (last visited Apr. 12, 2015), http://www.nrel.gov/research/ (providing detailed information about a variety of
BEHIND THE FENCE 617 surveys to determine viability, the NREL completed a set of case studies to analyze the potential of various technologies at specific sites.125 One such study involved the EPA’s RE-Powering America’s Land initiative—a program to use contaminated sites for renewable energy generation. 126 The study focused on a timber rich region of Vermont where timber markets used to drive the local industry.127 The closure of local mills and other manufacturing facilities left the area with an abundance of wood biomass resources. 128 Similar wood-based energy generation— both for electricity and for combined heat and electricity—would utilize local resources in heavily forested areas of the Eastern United States, ranging from Florida to Maine.129 The NREL study highlighted the potential of biomass technologies, particularly biomass-fired combined heating and electricity generation, as a viable and promising option for the former timber mill community. 130 Issues highlighted included “biomass availability and cost, equipment sizing and cost, and operation and maintenance costs.”131 Similar site-specific studies would need to be completed at any potential installation where biomass presented a viable option for renewable transition. In addition, in moving “behind the fence,” these and other sourcing
energy technologies, including mapping and research studies, which focuses on clean energy). 125. See id. (describing in detail each individual project under consideration). 126. See RE-Powering America’s Land, U.S. ENVIRONMENTAL PROTECTION AGENCY (last visited Feb. 15, 2015), http://www.epa.gov/oswercpa/ (describing a process by which the EPA “identifies the renewable energy potential of . . . sites and provides other useful resources for communities, developers, industry, state and local governments or anyone interested in reusing these sites for renewable energy development.”). 127. See NATIONAL RENEWABLE ENERGY LABORATORY, PUTNEY BASKETVILLE SITE BIOMASS CHP ANALYSIS, iv (Oct. 2013) [hereinafter NREL BIOMASS STUDY] (explaining the characteristics of the Putney site for biomass projects). 128. See id. at 4 (detailing the history and ownership of the Basketville site). 129. See NREL Biomass Maps, supra note 120 (providing GIS data for county-level biomass resource capabilities). 130. See NREL BIOMASS STUDY, supra note 132, at iv (summarizing the recommendations for the Basketville project). 131. Id. at v.
618 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) and cost challenges would likely become more complex, threatening the sustained viability of small-scale electricity generation projects.132
B. Case Study II: Solar in the U.S. Southwest
Another NREL study looked at the feasibility of solar photovoltaic cells at the Ft. Hood Military Base in Texas.133 The purpose of the study was to “assess the site for possible [solar energy] installations and estimate the cost, performance, and site impacts” of different solar options.134 In doing so, Ft. Hood sought to increase “behind the fence” generation using a locally available resource—ample land to introduce solar arrays.135 Factors for determining an appropriate site for a solar project on the base included: available area for the solar array, solar resource analysis, distance to transmission lines, and distance to major roads. 136 Aside from these technical requirements, any renewable energy project generating on an active military installation requires consideration of the base’s operating status, ground conditions, and restrictions associated with future development of the base.137 The study noted that Ft. Hood is slated for future expansion. 138 Therefore, the feasibility study accounted for “construction projects on and around the base as buildings are
132. See infra Part VI and accompanying text (reviewing a number of technical, legal, and practical challenges to similar “behind the fence” electricity production). 133. See NATIONAL RENEWABLE ENERGY LABORATORY, FEASIBILITY STUDY OF ECONOMICS AND PERFORMANCE OF SOLAR PHOTOVOLTAICS AT THE FT. HOOD MILITARY BASE OUTSIDE KILLEEN, TEXAS (Oct. 2013) [hereinafter NREL SOLAR STUDY] (“A Study prepared in partnership with the Environmental Protection Agency for the re-powering America’s land Initiative . . . .”). 134. Id. at iv. 135. See id. at iv (describing Foot Hood as the largest active-duty armored post in the United States at 159,000 acres). 136. See id. at 9 (pointing out that these and other factors are similar for rooftop mounted solar systems as well as those freestanding on the ground). 137. See id. at iv (adding further to the need to consider applicable local building code requirements with respect to snow, wind, and seismic zones). 138. See id. at 20 (estimating future energy cost and the amount of energy available to be used on site or sold to local companies).
BEHIND THE FENCE 619 upgraded regularly”139 and “existing build-out plans”140 to expand operations. Even taking these future variables into consideration, the nature of military strategy and planning—potentially expanding or reducing operations over the course of short time periods—rapid integration of “behind the fence” electricity generation will be further challenged by the rapid change inherent in military operations.141 The study identified approximately fifty acres on the Ft. Hood base for carport roof-mounted solar systems, a method of applying the solar technology to best fit with the operations and restrictions of the military installation.142 Even considering the economic incentives available at the time of the study, 143 however, the low retail rate of electricity in the region led NREL to conclude that solar renewable energy projects “would not be recommended for the site at the current utility price.”144 Looking beyond pure economics, the base would need to consider other factors such as grid independence and supply guarantees, potentially making a solar project more beneficial in the long term.145 Beyond solar, the Ft. Hood site has potential renewable energy prospects in the form of biomass power and biomass-based fuels and on- or off-site wind turbines.146
139. See NREL SOLAR STUDY, supra note 133, at iv. 140. Id. 141. See U.S Army War College, Energy Security in the 2010s and Implications for the U.S. Military, STRATEGIC STUDIES INSTITUTE, 27 (2014) (analyzing the steps involved in satisfying the U.S. Military’s energy needs in the 2010s). 142. See NREL SOLAR STUDY, supra note 133, at iv (noting that much of the installation’s acreage was excluded from the study due to the need for open space for field operations). 143. See id. at v (including the Solar and Wind Energy Business Franchise Tax Exemption; the Renewable Energy Property Tax Exemption; an incentive program through the local energy company; and the Federal Investment Tax Credit). 144. See id. at v (showing a table that diagrams the various incentives evaluated when making this determination). 145. See id. at iv (analyzing the number of average American households that could be powered off such a system and corresponding estimated job creation). 146. See id. at 2 (summarizing the compelling reasons for a diverse energy plan to reduce dependence on outside fuel sources and to increase supply security).
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C. Microgrids and Smart Grids
The increasing use of smart grid and microgrid technologies, combined with a shift from centralized energy generation to decentralized, small scale facilities better fits the structure and geographic distribution of Department of Defense installations. 147 A smart grid involves “an automated electric power system that monitors and controls grid activities, ensuring two-way flow of electricity and information between private power plants and consumers—and all points in between.” 148 Proponents of smart grid technology note that it represents a technical improvement over traditional grid systems by using information technology to improve the movement of electricity from producers to consumers, allowing consumers to interact with the grid, and integrating new and improved technologies into the operation of the grid.149 Ultimately, smart grid technology can increase the efficient distribution of electricity based on real-time demand and react to power outages and other energy disturbances.150 In the renewable energy context, the benefits are equally large: “[a] smart grid will allow for better integration of renewable energy
147. See Jeff St. John, The Military Microgrid as Smart Grid Asset, GREEN TECH GRID (May 17, 2013), http://www.greentechmedia.com/articles/read/the-military-microgrid-as-smart- grid-asset (assessing the benefits of microgrid technologies as applied to the Department of Defense); see also Jeff St. John, The Military Connects Microgrids for a ‘Secure Cluster’ of Power Network, GREEN TECH GRID (August 26, 2013), http://www.greentechmedia.com/articles/read/connecting-the-military- microgrid-dots (showing a map of U.S. Department of Defense work on microgrids). 148. See FADRS, What is Smart Grid?, FADRS CORP. (last visited Apr. 12, 2015), http://fadrs.com/what-is-smart-grid.html (explaining how a smart grid works and the benefits these grids provide in our evolving energy sector) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY CLIMATE AND THE ENVIRONMENT). 149. See RED MOUNTAIN INSIGHTS, MILITARY MICROGRIDS: MARKET POTENTIAL, CASE STUDIES, PROVIDER PROFILES 7 (2013) [hereinafter MILITARY MICROGRIDS] (outlining the various technical requirements to fit the smart grid nomenclature, including ability to self-heal from power disturbance events, active customer feedback in demand response, and resiliency against physical and cyber-attacks). 150. See id. (suggesting that a smart grid increases the efficiency of intermittent renewable technologies by controlling demand of traditional power sources during periods of high winds or strong solar activity).
BEHIND THE FENCE 621 sources” because of “smarter control over these intermittent power sources,” leading to economic and environmental benefits.151 Microgrids operate much the same as smart grids on a smaller scale.152 Like the smart grids described above, microgrids improve energy efficiency and accelerate the integration of renewable energy through the following mechanisms: facilitating demand management during normal operating hours; “islanding” the microgrid from the main grid if and when an upstream fault is detected; allowing for priority of loads during emergencies; and coordinating energy distribution to optimize the various energy streams. 153 During normal operations, a microgrid “increases energy efficiency by relying more heavily on non-continuous sources of power when they are available, such as wind and solar, and decreasing the use of generator or power from the civilian grid.”154 For the Department of Defense, these characteristics of microgrid technology all contribute to the long term renewable energy goals in a number of ways. First, the demand management and feedback will help the DOD increase its overall energy efficiency, addressing the goals of reducing overall electricity use.155 Second, use of microgrids will work towards a more independent and secure energy supply, contributing to the security and defense goals of the military’s energy plans. 156 Finally, because of a microgrids ability to integrate renewable energy sources by handling non-continuous sources of power when they are available, such as wind and solar, a microgrid will
151. See id. (adding that smart grid technology can contribute to energy storage capacities, important for new electric and hybrid vehicles). 152. See Toby Considine, William Cox, & Edward G. Cazlet, Understanding Microgrids as the Essential Architecture of Smart Energ, Grid Interop Forum 1 (2012) (describing how microgrids and smart grids operate and the current landscape for the smart energy industry). 153. See MILITARY MICROGRIDS, supra note 149, at 7 (describing the process by which microgrids adapt and respond to energy disturbances). 154. Id. at 8. 155. See 2012 ANNUAL ENERGY REPORT, supra note 24, at B-1–B-5 (listing the statutory and agency defined goals of energy reductions). 156. See id. at 57 (noting that smart grid technology offers “a more robust and cost effective approach to ensuring installation energy security than the traditional approach of backup generators tied to single critical loads.”).
622 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) facilitate the DOD’s renewable energy goals into the future.157 This last benefit may stand as the key factor in the transition to renewable energy, allowing for transient electricity supplies to become more normalized and reliable for operational needs.
D. Microgrids in the Military
Recognition of the benefits of microgrids and other means of decentralizing energy generation goes beyond federal entities focused on renewable energy. The Federal Energy Regulatory Commission (“FERC”) acknowledges the myriad benefits of distributed generation. 158 Similarly, a DOE study conducted pursuant to EPACT05 highlighted the benefits of distributed energy, which included: increased electric system reliability, reduction of peak power requirements, provision of ancillary services such as reactive power, improvements in power quality, reductions in land use effects and rights-of-way acquisition costs associated with centralized power, and a reduction in vulnerability to terrorism and improvements in infrastructure resilience.159 The DOE report concluded that distributed generation “will continue to be an effective energy solution under certain conditions and for certain types of customers, particularly those with needs for emergency power, uninterruptible power, and combined heat and power.”160 In particular, the study highlighted the potential for distributed power systems to reap the benefits of localized renewable energy generation, such as biomass, because of their ability to maintain an energy supply to local consumers
157. See MILITARY MICROGRIDS, supra note 149, at 7 (pointing out that more efficient integration of intermittent renewable power sources through smart grid technology will reduce the use of traditional sources, therefore cutting greenhouse gas emission and lowering costs). 158. See FERC Regulatory Change Could Boost Distributed Solar in the U.S., CLEAN TECHNICA (Jan. 18, 2013), http://cleantechnica.com/2013/01/18/ferc-regulatory-change-could-boost- distributed-solar-in-the-us/ (highlighting aspects of the FERC guidelines intended to “streamline the grid interconnection process for mid-sized solar projects that meet certain technical standards . . . [with the potential to] double the amount of solar qualifying for “fast track” interconnection in the US.”). 159. See DOE DISTRIBUTED GENERATION STUDY, supra note 114, at i (summarizing the focus areas of the study). 160. Id. at iv.
BEHIND THE FENCE 623 even in the face of a regional blackout.161 An ability to operate despite regional disturbances or other large-scale issues with a centralized grid represents a huge advantage to military installations because of the benefits of autonomy and security.162 Showing the impact of this study, recent regulatory reforms by FERC, the federal agency responsible for regulating the interstate commerce of electricity and other fuels, show further support for distributed forms of renewable energy. 163 These reforms were intended to streamline the grid interconnection process for mid-size solar projects that meet certain technical standards. 164 These and other reforms could double the amount of solar qualifying for “fast track” interconnection, allowing for expedited projects favoring renewable energy.165 A combination of on-site, “behind the fence” electricity generation and new and evolving microgrid technologies to facilitate distributed energy make strides towards weaning the DOD off of traditional fossil fuels while also bolstering the three broad benefits highlighted above. This transition, however, will not come without challenges and legal, logistical, and practical hurdles. The diversity of installation characteristics and grand size of the DOD itself combine to challenge the realities of potential transition programs. Recognizing these challenges, the last Part of this paper breaks down some of the major hurdles to rapid integration of renewable energy in the form of “behind the fence” electricity generation.
VI. Challenges and Recommendations
161. See id. at iii (adding that this increased reliability in the face of interruption will affect many sectors of the federal government, including telecommunications, chemicals management, agriculture and food, and government other facilities). 162. See id. (noting a cadre of benefits addressing the National Infrastructure Protection Plan (NIPP) issued by the Department of Homeland Security). 163. See CLEAN TECHNICA, supra note 158 and accompanying text. 164. See id. (stating that reforms would update orders from 2005, which first established procedures for interconnectivity). 165. See id. (indicating the importance of issuing new orders by explaining that the earlier FERC orders created barriers to bringing new projects online).
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While renewable energy may present numerous benefits the Department of Defense—strategic, environmental, and economic—and facilitate successful fulfillment of statutory mandates across federal agencies, various hurdles remain in the way of immediate change. These challenges—including a cumbersome process of federal contracting and securing financing for large projects, a lack of incentive to address long term goals on an annual basis, the necessity to maintain back-up electricity supplies (either behind the fence or localized), and the barrier to new renewable acquisition given existing electricity contracts— detracts from the viability of integrating renewable energy into the greater DOD energy portfolio. While variable other challenges remain outstanding, the following sections represents a non- exhaustive analysis of some of the major legal hurdles to rapid and fluid renewable energy integration.
A. Federal Permitting Restrictions
Despite the announcement in the Climate Action Plan of an expedited permitting process for new renewable energy project on federal lands, a lingering reality of any large-scale federal project is the cumbersome process of contracting with private parties. 166 Guidelines known as the Federal Acquisition Regulation (“FAR”) “makes the process lengthy and limits industry's ability to research and lean forward on project development.”167 Therefore, issues of timing and considerations of viability are necessarily affected by the ability of any individual military installation to study a site, develop a plan, secure financing, and commence construction.168 New Executive action addresses this problem, but the environment for public-private
166. See On Point for the Nation, supra note 31, at 101 (describing the “rule-laden government contracting process that starts upon the submission of the application”). The Federal Acquisition Regulation (“FAR”) standards are demanding and leave very little maneuver room for the federal agency to deviate from the pattern contracting process. Id. The selection process takes months to complete and the applying company has absolutely no indication of what the project may be or whether it will be profitable. Id. at 102. 167. Id. at 102. 168. See id. at 101 (listing the requirements companies proposing to address solar, wind, biomass or geothermal needs must demonstrate).
BEHIND THE FENCE 625 partnerships still demands a great deal of time.169 Once again, these factors make on-site development of renewable energy generation more favorable to off-site projects or leasing installation lands to private developers.
B. Lack of Short Term Incentives
The current goals—and the lack of incentives to meet them on an annual basis—hold back rapid development in the renewables field for the Department of Defense. As seen in the 2013 Annual Report, the DOD as a whole fell short of its annual goals for both energy efficiency and renewable electricity consumption.170 With the exception of the Air Force, every branch individually fell short of the performance standards set forth for the year. 171 Without any incentive to meet these annual standards, individual branches may fall behind on the long-term goals and fail to pursue active integration of renewable energy into their overall energy portfolios. These shortsighted decisions will often be made on the basis of economics. A cadre of observers has made it clear, however, that a successful move towards more renewable energy in the military must focus on the diverse advantages.172 Mission security, supply reliability, and environmental considerations all contribute to the long-term advantages of a transition to renewables.173
169. See Christopher J. Aluotto, Privatizing and Combining Electricity and Energy Conservation Requirements on Military Installations, 30 PUB. CONT. L.J. 723, 725 (2001) (examining the privatization of military electric utility systems in response to “the deteriorating condition of military systems” and to streamline the timeline of development). 170. See 2012 ANNUAL ENERGY REPORT, supra note 24, at D-1 (identifying the percent decrease in energy intensity as 17.7%, falling short of the goal of 21% for 2012, and a Department-wide introduction of 3.96% total renewable energy use, falling short of the annual goal of 5%). 171. See id. at 7 (highlighting the Air Force’s energy intensity reduction of 22.3% and increase of renewable consumption as 8% of total energy consumption, both exceeding the respective 24% and 7.5% goals for the year). 172. See WARNER, supra note 1, at 1–2 (describing the two complementary objectives of renewable energy integration). 173. See id. at 7 (observing that, by setting clear and defined goals, the Department “will be signaling to industry that it is serious, allowing them to make the needed changes in their structures and research”).
626 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
C. Generation vs. Acquisition
As Department of Defense reports show, one of the largest sources of renewable energy currently used to reach agency goals has been through the purchase of renewable energy from outside producers and through obtaining renewable energy certificates from other generators. 174 While this short-term approach may help achieve the interim benchmarks set forth in the EPACT05 and EISA07, acquisition of renewable energy from outside generators simply represents a shift in electricity sourcing rather than adoption of renewable energy practices. 175 In fact, both legislative mandates encourage and favor on-site generation in place of such external acquisition. 176 A number of existing funding mechanisms facilitate the construction and operation of on-site energy generation facilities. 177 By using these funding mechanisms now, the DOD will work towards building its total on-site generation capacity and focus on site-specific renewable projects.178 In 2013, the Department of Defense had nearly seven hundred renewable energy projects that represented seventy-five percent of the total amount of renewable electricity used.179 For many of these projects, three main funding mechanisms were used: Energy Production Facility Agreements (“EPFA”), Energy
174. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 35 (highlighting that the second and fourth largest “sources” of renewable energy in 2012 were through these methods of acquisition rather than through on-site generation). 175. See id. at 31 (listing goals for EPACT05 and EISA07). 176. See id. (demonstrating the increase in renewable and other forms of distributed, on-site electricity generation for cost-effective solutions). 177. See id. at 71–78 (enumerating and describing the various sources of energy funding). 178. See id. at 6 (stating fixed installations are a vital component of the military’s ability to win wars and the importance of reducing energy costs by using renewable energy sources). 179. See id. at 34 (describing the remaining 25% of renewable energy procurement as purchases of renewable energy from third parties or through renewable energy certificates (REC)); see also Loni Silva, Note, The Problems with Using Renewable Energy Certificates to Meet Federal Renewable Energy Requirements, 41 PUB. CONT. L.J. 985, 988 (2012) (suggesting RECs should only be “a short-term, stop-gap way to meet the [EPACT05] requirements while agencies build the facilities needed to actually consumer renewable energy”).
BEHIND THE FENCE 627
Enhanced Use Leases (“EULs”), and Power Purchase Agreements (“PPA”).180 The first two of these mechanisms, EPFAs and EULs, heavily favor on-site construction of energy generation facilities.181 Power Purchase Agreements (“PPAs”) function essentially as a traditional agreement to purchase energy, only in this context from a renewable source.182 PPAs allow “a developer to build, own, operate, and maintain a renewable generation systems on, or near, a customer’s property” and then sell the power to that customer.183 This approach to electricity generation would allow the DOD to rapidly reach its goals of renewable energy integration without having to bear the financial and technological burdens that comes with bringing energy generation facilities on line.184 PPAs also ensure these investments in generation facilities and distribution by private parties will “create jobs, foster a marketplace which allows for innovative technologies to
180. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 34 (defining and elaborating on these three funding mechanisms, including defining the source of statutory authority); see also Kevin McAllister, BARRIER TO MILITARY INSTALLATIONS UTILIZING DISTRIBUTED GENERATION FROM RENEWABLE ENERGY RESOURCES: THIRD PARTY POWER PURCHASE AGREEMENTS (2011) [hereinafter BARRIER TO MILITARY DISTRIBUTED GENERATION] (describing Power Purchase Agreements and their role in military energy acquisition). A third party Power Purchase Agreement (PPA) allows a developer to build, own, operate and maintain a renewable energy (RE) generation system on, or near, a customer’s property; and sell power, and possibly renewable energy credits (REC) to that customer. The developer provides a majority of the initial capital, and operation and maintenance expenses. The customer receives the benefits of local generation and possibly, depending on the contract language, the RECs associated with the renewable energy generated. Id. at 2. 181. See 2012 ANNUAL ENERGY REPORT, supra note 24, at 34 (defining the functions of EPFAs and EULs and indicating their location in the US Code). 182. See BARRIER TO MILITARY DISTRIBUTED GENERATION, supra note 180, at 2 (describing the relationship between the energy source developer and potential customers, including the benefits to each party). 183. Id. at 2. 184. See ENLISTING THE SUN, supra note 94, at 9 (explaining a PPA is an attractive financing option because of the Federal Investment Tax Credit and the ability to use on-site renewable energy generation, avoiding up-front costs).
628 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) be developed, maximize the benefit to taxpayers . . . and allow the [DOD] to maintain a mission critical focus while meeting its requirements for renewable energy sources, energy efficiency, and energy security.”185 The disadvantages of PPAs, however, lie in the reliance on external sources of electricity, exacerbating the challenges of security and reliability highlighted above.186 Significantly, although many states have legislative barriers to the use of PPAs, “effectively eliminating the ability of rate payer in the state to enter into power purchase agreements with third party developers/operations of distributed generation,” the DOD appears to have a way around these state laws through statutory mechanisms. 187 Section 591 of Title 40 and Section 2922(a) of Title 10 “seem to resolve this issue by granting the Department of Defense . . . the ability to enter into contracts with energy providers regardless of state law.”188
D. Shifting Land Management
Another emerging issue challenging a transition to on-site, “behind the fence” electricity generation results from a subtle trend to withdraw Department of Defense lands to management by the Department of the Interior (“DOI”).189 This results in a net decrease in land area managed by the military and its branches. 190 Various factors have contributed to the more frequent practice of transferring management of some Department of Defense land to the Department of Interior.191
185. Id. at 1. 186. See supra Part III and accompanying text (describing the benefits of renewable energy to the DOD). 187. See BARRIER TO MILITARY DISTRIBUTED GENERATION, supra note 180, at 1 (suggesting the DOD’s office of General Counsel needs to clarify certain statutory provisions that could potentially resolve the issue). 188. Id. 189 See Memorandum of Understanding between The Department of Defense and The Department of the Interior 1 (July 20, 2012) [hereinafter DOD/DOI MOU] (proposing a partnership between the Department of the Interior and the DOD to create renewable energy sources on withdrawn lands). 190 See Ross W. Gorte et al., FEDERAL LAND OWNERSHIP: OVERVIEW AND DATA 15 (2012) (reporting a 1 million acre decrease in land area for the DOD between 2010 and 2012, while acreage of land controlled by departments of the DOI has increased). 191. See id. (stating the DOD may dispose of unwanted lands that it deems surplus to its purposes).
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To address this issue, the DOI partnered with the DOD to meet the dual goals of helping “the [DOD] develop renewable energy in the interest of greater installation energy security and reduced installation energy costs and to help meet [DOI] goals of increasing renewable energy production from public lands.” 192 This partnership seeks not only to “encourage a dialogue” with energy developers and the agencies, but it also attempts to “investigate existing contract and management authorities to achieve mutual renewable energy goals and identify required changes in existing authorities” to facilitate a more streamlined permitting process.193 In essence, the partnership will allow for increased interagency coordination to address the complex siting and permitting issued discussed in earlier sections.194 The Department of Defense is concurrently developing programs to increase land under its management to combat urban encroachment and to meet conservation goals. 195 The overall trend, however, is less land for potential energy projects— particularly those requiring large land areas such as solar and wind—and more complex inter-agency processes for permitting and development of renewable energy projects on land held by non-defense agencies.196
E. Technological Challenges
Another clear challenge of “behind the fence” generation arises when military installations attempt to incorporate new or
192. DOD/DOI MOU supra note 189, at 2. 193. See id. at 2 (outlining a plan for the partnership between the DOD and the DOI). 194. See id. at 1 (showing the DOD and DOI’s commitment to partnership to work together to create safer, cleaner, and more secure energy supplies). 195. See Readiness and Environmental Protection Integration (REPI) Program, U.S. DEPARTMENT OF DEFENSE, SUSTAINABLE RANGES INITIATIVE, http://www.denix.osd.mil/sri/repi/ (describing the land acquisition program as a partnership to “acquire easements or other interests in land from willing sellers to preserve compatible land uses and sustain wildlife habitat near installations and ranges where the military operates, tests, and trains”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 196. See id. (stating that the REPI program is part of a larger initiative not only to promote military readiness but also preserve the habitat through various means).
630 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) under-tested technologies to reach renewable goals. Additional resource challenges will arise, such as the external requirements of any form of energy production. For example, “biomass programs, geothermal projects, and to a more limited extent the solar programs . . . must have sufficient supplies of water. Additionally, in order to transport and manage water, the energy- dependent water utilities infrastructure must also have sufficiently reliable electricity.”197 While these resource barriers would be present with any form of energy generation and transport, the renewables context may present additional technological hurdles for military integration of renewables versus well-known traditional forms.198 As highlighted above, this aspect of facility-specific generation may make offsite “neighbor” generation facilities a more practical manifestation to achieve renewables integration. 199 Power Purchase Agreements “allow federal agencies to implement on-site renewable energy projects with no upfront capital costs.”200 This, in turn, provides a secure source of renewable electricity for a known period of time while leaving lifetime ownership, operation, and maintenance of the system to the developer.201
F. Existing Contracts
The Power Purchase Agreements (“PPA”) mentioned earlier in this Part stand as one of the largest roadblocks to the introduction of new renewable energy projects on military installations.202 The traditional energy market relies on long-term purchase agreements to meet the up-front capital investment to
197. On Point for the Nation, supra note 31, at 75–76. 198. See Project Financing Analysis, NATIONAL RENEWABLE ENERGY LABORATORY (last visited Apr. 12, 2015), http://www.nrel.gov/analysis/key_activities_finance.html?print (“Development of projects relying on newer or innovative technologies that lack extensive operational track records may be slowed because many tax equity investors are seen as highly averse to technology risk.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 199. See id. (summarizing aspects of renewable resource project finance that may be problematic for potential investments). 200. On Point for the Nation, supra note 31, at 78. 201. See id. at 78–79 (stating the costs and benefits for agencies and developers in the contractual relationship). 202. See supra Part VI(C) and accompanying text.
BEHIND THE FENCE 631 bring new energy generation on-line. 203 Without such agreements, it would be very difficult for new energy projects to ever obtain the capital to build a new facility—investors are weary to provide start-up capital without some promise of long- term profits.204 This is just as true for renewable energy projects as it has been for traditional energy projects.205 As a result of these existing variables, even if the capacity for renewables were established on all military installations in the near future, the transition to all renewable electricity or even net-zero installations would depend heavily on the lifespan of existing contracts and the potential ability of the DOD to opt out of existing contracts. 206 This may involve negotiations with current generators and producers. The trickle-down effect of these negotiations could been seen in the willingness of states or regions to allow increased renewable production; if large military installations cease to purchase large quantities of electricity from their local traditional energy producer, other users may realize significant rate increases. While the opportunity for rapid renewable energy through “behind the fence” electricity generation stands large for the Department of Defense, a number of hurdles remain, including federal permitting challenges, lack of short term incentives, myriad challenges of transitioning to on-site generation from traditional acquisition agreements, and potential challenges by local providers and state governments. 207 It will be through partnerships such as the DOD/DOI Renewable Energy Partnership Plan, however, that interagency action will both
203. See BARRIER TO MILITARY DISTRIBUTED GENERATION, supra note 180, at 2 (describing the traditional financing relationship in a PPA). 204. See id. at 1 (emphasizing the importance of leveraging third party investors and building on previous contracting schemes). 205. See id. at 2 (describing the Army’s desire to use renewable technologies yet recognizing the high costs to implement it and increased private capital required to pay for the new systems). 206. See id. at 8 (giving the example of North Carolina, where customers of existing electric utility monopoly must get permission from those suppliers to enter into PPAs with third parties). 207. See supra Part VI and accompanying text (detailing the challenges presented to the DOD in implementing new policies).
632 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) facilitate rapid integration and alleviate the issues raised above.208
VII. Conclusion
As the largest single global consumer of energy and electricity, the U.S. Department of Defense stands to contribute a great amount in the shift towards renewable energy.209 The past decade has included a wealth of action from the executive and legislative branches, as well as activity within the agency itself, to create aspirational benchmarks of renewable energy production and use.210 The realities of the challenges of financing, siting, and procuring the technologies necessary to get these projects online caused the Department of Defense to fall short of its goals in the 2012. However, progress has been made— increasing total use of renewable electricity use by the DOD to 4% and an increase in energy efficiency, decreasing use across the board by 17%. To quicken integration of renewable sources into the DOD’s overall energy portfolio, two mechanisms should be adopted. First, energy production for use on military installations should be distributed and decentralized, increasing efficiency and gaining the benefits of energy security and reliability.211 Related to this, the DOD should also quickly assess the availability and efficiency of place-specific renewable fuel sources such a geothermal and biomass.212 Together, these two mechanisms will expedite getting new energy generation on-line and will remove the complicated issues of transmission and scale. One of the largest challenges that stands in the way of progress is long term procurement and generation contracts already in place on many military installations.213 With the DOD
208. See DOD/DOI MOU, supra note 189 (documenting a partnership between the DOD and DOI to commit to renewable energy projects). 209. See supra Part I and accompanying text. 210. See supra Part II and accompanying text. 211. See supra Part V(C) (describing the benefits of microgrids and smartgrids and their fit into the DOD systems). 212. See supra Part V (outlining potential technologies that could promote local energy generation). 213. See supra Part VI(F) (explaining why existing contracts can delay or increase costs of renewable energy projects).
BEHIND THE FENCE 633 trying to reduce its use across the agency and to replace existing sources with renewable sources, many of these existing contracts will have to either be renegotiated or not renewed. 214 Additionally, the high costs of instituting new energy generation projects—even on a small scale—make adoption across the entire Department of Defense huge challenge.215 Ultimately, the benefits of transitioning to renewable energy sources are great for the Department of Defense. A comprehensive and expansive initiative that couples site-specific technologies with agency-wide coordination will help the DOD both meet its statutorily mandated targets for energy efficiency and production and also effect positive change in the environmental impact of our nation’s single largest energy consumer.
214. See id. (describing challenges existing contracts pose for changing technology). 215. See id. (explaining the investment trends in energy projects and why renewable energy projects have unique problems).
The Shifting Use of the So-Remote-as- to-be-Negligible Standard for Qualified Conservation Contributions
Ashley H. Waterbury* Abstract
Qualified conservation contributions, also known as conservation easements, have become a subject of close scrutiny under the Internal Revenue Service within the past decade. One reason for such scrutiny is that conditions are being imposed on these contributions, testing the perpetuity requirement for conservation easement deductions. In order for a condition on the donation to survive, the condition must be “so remote as to be negligible.” The judicial interpretation of the so-remote-as-to-be- negligible standard has fluctuated since its addition to the Treasury Regulations in 1939. Most recently, the Tax Court in Graev v. Commissioner, explored the meaning of the so-remote- as-to-be-negligible standard outside of the traditional grantor/grantee relationship by assessing the likelihood of IRS action. By denying the deduction in Graev, the Tax Court highlighted that a condition based on IRS action, namely the allowance of a deduction, should not be a permissible condition for qualified conservation contributions. This Note will argue that further clarification of the so-remote-as-to-be-negligible standard should be included in the Treasury Regulations. In particular, conditions based on the IRS allowance of a deduction should be explicitly barred from consideration under the so-remote-as-to-be- negligible standard.
* Ashley H. Waterbury ([email protected]) is a J.D. candidate at Washington & Lee University School of Law, May 2015, and the Executive Editor for the Journal of Energy, Climate, and the Environment. Ashley would like to thank Professor Brant Hellwig for his valuable guidance while writing this Note.
634 SHIFTING USE 635
Table of Contents
I. Introduction ...... 635 II. The Code and Regulations on the Qualified Conservation Easement Deduction ...... 639 A. The Code...... 639 B. Treasury Regulations ...... 641 III. The Case Law Development of the So-Remote-as-to-be- Negligible Standard ...... 642 A. Estate Tax Origins ...... 642 1. Commissioner v. Estate of Sternberger ...... 643 2. United States v. Dean ...... 646 3. Estate of Woodworth v. Commissioner ...... 648 4. Hamilton National Bank of Chattanooga v. United States ...... 651 B. Federal Income Tax Cases ...... 654 1. Early Cases Addressing the So-Remote-as-to-be-Negligible Standard ...... 655 2. Case Law on Conservation Easements and the So-Remote- as-to-be-Negligible Standard ...... 659 V. Graev v. Commissioner, an Overview ...... 661 A. Background ...... 662 B. Tax Court’s Opinion ...... 664 VI. Lessons from Graev v. Commissioner ...... 670 VII. Conclusion ...... 673
I. Introduction
In 1980, Congress passed section 170(h) of the Internal Revenue Code (“Code”), creating the current qualified conservation contribution structure.1 A qualified conservation contribution is defined as “a qualified real property interest to a qualified organization exclusively for conservation purposes,” and is commonly known as a conservation easement.2 In allowing
1. See Act of Dec. 17, 1980, Pub. L. No. 96-541, 94 Stat. 3204 (codified as amended at 26 U.S.C. § 170(h) (2014)) (allowing qualified conservation easement deductions, but only if the easements meet one of three exceptions). 2. See STAFF OF THE JOINT COMM. ON TAXATION, 109TH CONG., OPTIONS TO IMPROVE TAX COMPLIANCE AND REFORM TAX EXPENDITURES, JCS-2-05,
636 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) deductions for donations of conservation easements, Congress wanted to create incentives for landowners to preserve environmentally and historically important property.3 Since then, conservation easements have become a source of donations resulting in large deductions.4 For example, from 2003–2006, the average value of a donated conservation easement was $491,068, making conservation easements the highest valued per-donation value by over $300,000.5 As conservation easements amounted to such large deductions, the Internal Revenue Service (“IRS”) raised concerns over conservation easement deductions.6 IRS Notice 2004-41 alerted donors that the IRS might issue penalties for improper use of the deduction.7 Improper uses have included inflated valuation of the easement, not creating an easement in perpetuity, and requests to return easements after the donation has already been made.8 This Note will specifically address one aspect of the perpetuity requirement for conservation easements. While at 277 (Comm. Print 2005) [hereinafter OPTIONS TO IMPROVE TAX COMPLIANCE], available at http://www.jct.gov/s-2-05.pdf (defining qualified conservation contribution) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 3. See S. REP. NO. 96-1007, at 9 (1980) (explaining that the Senate wanted to expand deductions for conservation easements in recognition of the “important role” easements play to further conservation goals). 4. See Josh Eagle, Notional Generosity: Explaining Charitable Donors’ High Willingness to Part with Conservation Easements, 35 HARV. ENVTL. L. REV. 47, 48 (2011) (“Americans give away easements in enormously valuable chunks in comparison to other kinds of real and personal property.”). 5. See id. at 49 (providing a graph which illustrates the contrast between the high value of qualified conservation easement donations and other donations). 6. See I.R.S. Notice 2004-41, 2004-28 I.R.B. 31, available at http://www.irs.gov/pub/irs-tege/n2004_41.pdf (addressing awareness of the improper use of charitable contribution deductions for conservation easements and an intention to penalties for such improper deductions) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 7. See id. (“[I]n appropriate cases, the Service intends to disallow such deductions and may impose penalties and excise taxes.”). 8. See Steven T. Miller, Comm’r, Tax Exempt and Government Entities, Internal Revenue Serv., Remarks Before the Land Trust Alliance Public Spring Public Lands Conference (March 28, 2006), available at http://www.landtrustalliance.org/policy/tax-matters/rules/remarks-of-steven-t.- miller-march-2006 (addressing the current issues with charitable contributions of conservation easements) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). SHIFTING USE 637 conservation easements generally must exist in perpetuity, the Treasury Regulations allow for the consideration of a remote future event in conservation easement deeds.9 These remote future events will not violate the perpetuity requirement so long as the likelihood of the event occurring is “so remote as to be negligible.”10 This standard originated in the estate tax provisions, but it has been applied in federal income tax law since 1959.11 The regulations themselves do not further clarify the standard.12 Hence, the task of articulating the level of remoteness requisite for the standard has been left to case law.13 A recent Tax Court case, Graev v. Comissioner, interpreted the so-remote-as-to-be-negligible standard in the context of a façade easement.14 In Graev, the grantee provided a side letter separate from the conservation easement agreement whereby it agreed to refund the easement to the taxpayer grantor if the IRS disallowed a deduction for the grantor.15 The Tax Court held that this side letter created a condition of a remote future event on the easement and that the likelihood of this event was
9. See, e.g., Treas. Reg. §§ 1.170A-1(e), -7(a)(3), -14(g)(3) (2014) (addressing the issue of conditions based on the occurrence of future events). 10. See Treas. Reg. §§ 1.170A-1(e), -7(a)(3), -14(g)(3) (2014) (allowing deductions for conservation easements which have conditions on remote future events as long as these future events are “so remote as to be negligible”). 11. See Graev v. Comm’r, 140 T.C. 377, 389 (2013) (providing a history of Treas. Reg. §1.170A-1(e)). 12. See Satullo v. Comm’r, 66 T.C.M. (CCH) 1697, 6 (1993) (“The regulations offer no specific guidance for determining whether a possibility of occurrence is so remote as to be negligible . . . .”). 13. See id. (explaining that the regulations do not define the so- remote-as-to-be-negligible standard, so the standard is defined through case law). 14. See Graev, 140 T.C. at 377–78 (“The question now before the Court is whether deductions for Mr. Graev’s contributions of cash and the easement to NAT [National Architectural Trust] should be disallowed because they were conditional gifts. The answer depends on whether . . . the chance that the condition would occur was ‘so remote as to be negligible.’”). Façade easements are a type of conservation easement which preserve historic properties. INTERNAL REVENUE SERV., FAÇADE EASEMENT CONTRIBUTIONS, FAÇADE EASEMENT BRIEF (Aug. 2009). 15. See Graev, 140 T.C. at 383 (describing the contents of the side letter). 638 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) more than negligible.16 This holding raises questions as to how the so-remote-as-to-be-negligible standard should be applied, as well as how taxpayers are to prepare for successful conservation easement deductions.17 The goal of this Note is to evaluate the evolution of the so- remote-as-to-be-negligible standard, particularly as a result of its use in Graev. To begin, Part II will discuss the details of the Internal Revenue Code and Treasury Regulations, which allow for conservation easements. Following that, Part III will examine prior case law using the so-remote-as-to-be-negligible standard and address how its definition has changed. With that background, Part IV will then address the Graev case in detail, discussing the oddities of the case. In particular, it will highlight the grantor’s use of a condition solely for tax purposes. Lastly, Part V will discuss the future of the so-remote-as-to-be-negligible standard in light of Graev. This Note recommends that the Treasury promulgate regulations to further define the so-remote-as-to-be-negligible standard. The current definitions developed by case law are overly broad and allow for conditions that do not primarily serve the purpose of conservation.18 Grantors of qualified conservation easements should not be permitted to include “tax insurance” clauses along with their donations.19 Rather, these donations should be irrevocable on tax deductibility grounds. The ability to
16. See id. at 398 (explaining that the issuance of the side letter “implies a non-negligible risk”). 17. See Michelle L. Vesole, Listen to the Warnings: Contingent Charitable Contribution Deduction is Disallowed, BLOOMBERG BNA ESTATE TAX BLOG (July 18, 2013), http://www.bna.com/listen-warnings-contingent- b17179875304/ (highlighting the tension between the Graev holding and the application of the so-remote-as-to-be-negligible standard) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 18. See Timothy L. Jacobs, Kaufman—Another Sad Chapter in the Service’s Assault on Façade Easements, TAXATION OF EXEMPTS, July/August 2014, at 16 (2014), http://www.hunton.com/files/Publication/8956f103-d3ea-4468- b4d5-a6ecba26f4b7/Presentation/PublicationAttachment/cd2aa9de-5188-470a- 8e2b-780e318ec2df/Kaufman_Another_Sad- Chapter_In_The_Services_Assault_On_Facade_Easements.pdf (illustrating how cases in the area of façade easements are unpredictable in the wake of Graev and subsequent cases) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 19. I would like to thank Professor Brant Hellwig for the suggestion to use the term “tax insurance.” SHIFTING USE 639 refund conservation easement donations suggests that the donation is being made solely for tax benefits, as opposed to conservation purposes.20 These tax driven donations are the ones most likely to lead to aggressive valuation, one of the biggest issues with conservation easements today.21 Disqualifying conditions that allow refunds upon a denial of a deduction attack what could be considered the most aggressive conservation easement transactions.22
II. The Code and Regulations on the Qualified Conservation Easement Deduction
A. The Code
Section 170(a) of the Code provides a deduction for any charitable contribution.23 Yet, this general rule of allowance is subject to a host of conditions.24 One such restriction, section 170(f)(3), applies to partial interests in property.25 Initially, one would think that a conservation easement would be disallowed because it is a partial interest in property; it is an agreement between the landowner and the holder of the easement to restrict use on the property, and it does not provide any other ownership
20. See Remarks of Steven T. Miller, supra note 8 (highlighting situations where taxpayers petition for the return of the easement they donated upon discovering that the tax credit they received was not marketable). 21. See Theodore S. Sims, Qualified Conservation Restrictions: Recollections of and Reflections on the Origins of Section 170(h), 33 UTAH ENVTL. L. REV. 41, 57 (2013) (explaining the widespread propensity for conservation easements to be valued “aggressively”). 22. See id. at 58 (illustrating a proposed system that makes disclosure of the deduction amount a prerequisite to claiming a deduction and acknowledging that such a system “could by itself function as a deterrent to the most egregiously aggressive positions, by substantially simplifying the process of detection and reducing the costs of enforcement.”) 23. See I.R.C. § 170(a)(1) (2014) (“There shall be allowed as a deduction any charitable contribution . . . payment of which is made within the taxable year.”). 24. See I.R.C. § 170(f) (2014) (providing for “disallowance of deductions in certain cases,” as well as providing other “special rules”). 25. See I.R.C. § 170(f)(3) (2014) (allowing deductions for contributions of partial interests in property “only to the extent that the value of the interest contributed would be allowable as a deduction under this section if such interest had been transferred in trust”). 640 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) rights.26 Section 170(f)(3)(B)(iii), however, provides an exception to the partial interest rule, allowing a deduction for “a qualified conservation contribution.”27 Conservation easements fall into this category.28 The Code provides a definition in section 170(h) for a qualified conservation contribution: it must be a contribution of (1) a “qualified real property interest,” 2) “to a qualified organization,” and (3) “exclusively for conservation purposes.”29 A “qualified property interest” includes a conservation easement because it is “a restriction (granted in perpetuity) on the use which may be made on the real property.”30 Common grantees of conservation easements, charities and non-profit organizations, meet the requirements for a “qualified organization.”31 Conservation easements will meet the “exclusively for conservation purposes” requirement as long as the “conservation purpose is protected in perpetuity.”32 Thus, in order to qualify for a deduction on one’s conservation easement, two perpetuity requirements must be met: (1) the easement must be granted in perpetuity, and (2) the purpose of the easement must remain in perpetuity.33 This dual requirement highlights the priority of
26. See Eagle, supra note 4, at 53 (quoting Nancy A. McLauglin, The Role of Land Trusts in Biodiversity Conservation on Private Lands, 38 IDAHO L. REV. 453, 453 (2002)) (defining conservation easements). 27. See I.R.C. § 170(f)(3)(B)(iii) (2014) (allowing an exception to the general rule for deductions for qualified conservation contributions). 28. See OPTIONS TO IMPROVE TAX COMPLIANCE, supra note 2, at 277 (placing conservation easements into the category of qualified conservation contributions). 29. I.R.C. § 170(h)(1)(A)–(C) (2014). 30. See I.R.C. § 170(h)(2)(C) (2014) (defining qualified real property interests). 31. See OPTIONS TO IMPROVE TAX COMPLIANCE, supra note 2, at 277 (“Qualified organizations include certain governmental units, public charities that meet certain public support tests, and certain supporting organizations.”); I.R.C. § 170(h)(3) (2014) (defining “qualified organization”); I.R.C. § 170(b)(1)(A) (2014) (outlining types of organizations to which individuals may make deductible charitable contributions). 32. See I.R.C. § 170(h)(5)(A) (2014) (requiring the conservation easement to be protected in perpetuity in order to qualify as “exclusively for conservation purposes”). 33. See Ann Taylor Schwing, Perpetuity is Forever, Almost Always: Why it is Wrong to Promote Amendment and Termination of Perpetual Conservation Easements, 37 HARV. ENVTL. L. REV. 217, 221 (2013) (explaining the perpetuity requirements for qualified conservation easements). SHIFTING USE 641 perpetuity when seeking to qualify for a deductible conservation contribution.34 Perpetuity is crucial for donations of conservation easements because it makes the easement holder’s use restriction enforceable against others.35 Without perpetuity, the use and purpose of the property could change easily, giving no value to the easement itself.36
B. Treasury Regulations
The statute does not address how perpetuity is defined for charitable contributions.37 Rather, that issue is left to administrative guidance.38 The Treasury Regulations do not insist on absolute perpetuity.39 Instead, the regulations allow for consideration of a remote future event in the conservation agreement, so long as that remote future event is so remote as to be negligible.40 The regulations use this terminology three times:
34. See id. at 243 (explaining that “[t]he whole purpose of a conservation easement is to remain binding despite changes in circumstances, such as enhanced profitability of land for development.”). 35. See Nancy A. McLaughlin, Internal Revenue Code Section 170(h): National Perpetuity Standards for Federally Subsidized Conservation Easements, Part I: The Standards, 45 REAL PROP., TR. & EST. L. J. 473, 482 (2010) (noting that the perpetuity requirement allows the conservation purpose to be protected against all other parties in interest, including successors in interest). 36. See Jessica E. Jay, When Perpetual is Not Forever: The Challenge of Changing Conditions, Amendment, and Termination of Perpetual Conservation Easements, 36 HARV. ENVTL. L. REV. 1, 3 (2012) (explaining that perpetual conditions restricting the use of land “protect[s] conservation values”). 37. See Treas. Reg. §§ 1.170A-1(e), -7(a)(3), -14(g)(3) (2014) (requiring the use of the so-remote-as-to-be-negligible standard, but not defining it). 38. See Nancy A. McLaughlin, Extinguishing and Amending Tax- Deductible Conservation Easements: Protecting the Federal Investment after Carpenter, Simmons, and Kaufman, 13 FLA. TAX REV. 217, 290–92 (2012) (noting the IRS’s “helpful”, but still inadequate, guidance of the perpetuity standard through the issuance of information letters). 39. See Treas. Reg. §§ 1.170A-14(g)(1)–(3) (2014) (indicating that the possibility of a so-remote-as-to-be-negligible standard contemplates the fact that absolute perpetuity is not required). 40. See Treas. Reg. § 1.170A-1(e) (describing situations when conditions dependent upon future events are allowed). 642 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
(1) to apply to conditional transfers,41 (2) to apply to contributions of partial interests in property,42 and (3) to apply to conservation easements specifically.43 All three regulations require that the standard be applied at the time the gift is made.44 Outside of this, there is no other guidance from the regulations on how to apply this standard or how it is defined.45 Because of this, the courts’ application and definition of the standard have changed over time.46 It also allowed for the grantor in Graev v. Commissioner to attempt to include a refund condition dependent on the allowance of a tax deduction.47
III. The Case Law Development of the So-Remote-as-to-be- Negligible Standard
A. Estate Tax Origins
Use of the so-remote-as-to-be-negligible standard first appeared in the estate tax regulations in 1939 for conditional
41. See Treas. Reg. § 1.170A-1(e) (2014) (“If as of the date of a gift a transfer for charitable purposes is dependent upon the performance of some act or the happening of a precedent event . . . no deduction is allowable unless the possibility that the charitable transfer will not become effective is so remote as to be negligible.” (emphasis added)). 42. See Treas. Reg. § 1.170A-7(a)(3) (2014) (“A deduction shall not be disallowed under section 170(f)(3)(A) and this section” because of an event happening so long as “if on the date of the gift it appears that that the possibility that such act or event will occur is so remote as to be negligible”). 43. See Treas. Reg. § 1.170A-14(g)(3) (2014) (“A deduction shall not be disallowed under section 170(f)(3)(B)(iii) and this section merely because the interest which passes to, or is vested in, the donee organization may be defeated by the performance of some act of the happening of some event, if on the date of the gift it appears that the possibility that such act or event will occur is so remote as to be negligible.”). 44. See Treas. Reg. §§ 1.170A-1(e), -7(a)(3), -14(g)(3) (2014) (requiring that the condition be assessed on the “date of the gift”). 45. See Satullo v. Comm’r, 66 T.C.M. (CCH) 1697, 6 (1993) (acknowledging no guidance exists for the application of the standard, but also noting that there is no need for the court to provide any at this time because it is clear from the facts that likelihood of event was more than negligible). 46. See McLaughlin, supra note 38, at 225–29 (2012) (outlining various courts’ struggle to determine the standard and implications of the so- remote-as-to-be-negligible standard). 47. See Graev v. Comm’r, 140 T.C. 377, 385 (2013) (quoting the conditions of the easement set forth by the grantor in the conservation deed). SHIFTING USE 643 charitable deductions.48 Early cases interpreted the regulations to state that a deduction would be disallowed if the possibility the charity would not take was more than so remote as to be negligible.49 These regulations shifted the focus of evaluation onto the likelihood of the charity taking in light of the other facts and circumstances, including each devise related to the condition.50 The ultimate decision of whether the condition would be allowed rested on whether the charity would be able to take upon operation of the condition.51
1. Commissioner v. Estate of Sternberger
The Supreme Court first interpreted the so-remote-as-to- be-negligible standard in 1955 in Commissioner v. Estate of Sternberger.52 In Sternberger, the decedent left a wife (62 years old) and daughter (27 years old) surviving him.53 Under the terms of his will, if his daughter died without descendants surviving her or her mother, then a charitable bequest would be made.54 At the time of decedent’s death, the daughter was divorced and had no
48. See Treas. Reg. § 81.46(a) (1949) (stating that for estate tax purposes, if there is a conditional transfer to a charity, “no deduction is allowable unless the possibility that charity will not take is so remote as to be negligible”); see also Treas. Reg. § 20.2055-2(b)(1) (2014) (stating that deductions for charitable transfers are not “allowable unless the possibility that the charitable transfer will not become effective is so remote as to be negligible”); Hamilton Nat’l Bank of Chattanooga v. United States, 236 F. Supp. 1005, 1012 (E.D. Tenn. 1965) (explaining the adoption of the 1949 regulation into the current regulations). 49. See Hamilton Nat’l Bank, 236 F. Supp. 1005, 1012 (“To be entitled to a charitable deduction prior to 1939 in the case of a transfer to a charity subject to a condition, the estate had to prove that it was impossible for the charity not to take.”) 50. See id. at 1012–13 (outlining the evolution of the interpretive shift in focus). 51. See id. at 1010 (requiring a finding that the charity’s remainder interest in a decedent’s estate be capable of valuation, proving that the charity would take). 52. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 194 (1955) (describing estate tax regulations before the allowance of conditions for remote future events under the so-remote-as-to-be-negligible standard). 53. See id. at 188 (providing background information on the decedent’s surviving heirs). 54. See id. (describing the terms of the testamentary trust). 644 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) children.55 The executor of the decedent’s estate made a deduction for the charitable bequest, and assumed that the daughter would not have any children.56 The Commissioner disallowed the deduction, and the estate petitioned the Tax Court to determine whether the possibility a charity would not take under the decedent’s will was so remote as to be negligible.57 The Tax Court reversed the Commissioner’s determination.58 The Court of Appeals for the Second Circuit affirmed, and the case then went to the Supreme Court.59 This Supreme Court opinion was the first to define the so-remote-as-to-be-negligible standard originally promulgated in 1939.60 Keeping in mind that prior to 1939, the regulations did not allow for conditional donations,61 the Court defined so remote as to be negligible to be “negligible” or “highly improbable.”62 The Court imposed this high level of scrutiny because it did not want a condition which prevented the charity from taking, but still allowed the taxpayer to get a deduction.63 The Court in Sternberger focused the application of the so-remote-as-to-be- negligible standard on the grantee/charity, instead of the grantor: the grantor may be able to give, but it was important that the
55. See id. (describing factors which would affect the decedent’s daughter receiving the residuary estate). 56. See id. at 188–90 (describing the actions of the executor of the estate). 57. See id. at 188–93 (presenting the procedural history and issue of the case). 58. See id. at 189 (describing the Tax Court’s treatment of the case). 59. See id. (describing the Second Circuit’s treatment of the case). 60. See id. at 195–99 (noting that a similar issue arose in Humes v. United States, 276 U.S. 487 (1928), but it was not specifically interpreting the so-remote-as-to-be-negligible standard because it had not yet been promulgated). 61. See id. at 194 (“The predecessor of § 81.46 confined charitable deductions to outright, unconditional bequests to charity.”); see also Hamilton Nat’l Bank of Chattanooga v. United States, 236 F. Supp. 1005, 1012 (E.D. Tenn. 1965) (discussing that the “so remote as to be negligible” language did not become a part of the charitable contribution deduction regulations until 1939). 62. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 194 (1955) (“Section 81.46(a) today yields to no condition unless the possibility that charity will not take is ‘negligible’ or ‘highly improbable.’”). 63. See id. (reiterating that the encouragement of bequests to charity is one of the main reasons why a charitable deduction is allowed). SHIFTING USE 645 grantee had the opportunity to take.64 The Court evaluated the ability of the charity to take based on the self-interest of the daughter to remarry.65 If the daughter did remarry, then the condition affording the charity the opportunity to take would not occur.66 The Court calculated that she would have a “$2,000,000 inducement to remarry.”67 The Court deviated from evaluating satisfaction of the condition solely through actuarial tables, suggesting that the so-remote-as-to-be-negligible standard should be evaluated through more subjective factors related to the parties involved in the transaction.68 Sternberger also emphasized that the charity must take fully in order to get the deduction; the amount of the deduction cannot be based on the proportional likelihood of the charity taking.69 The so-remote-as-to-be-negligible standard is an all or nothing requirement.70 If a condition’s occurrence would inhibit the grantee’s ability to take but is nonetheless so remote as to be negligible, then the deduction is still allowed.71 Ultimately, the deduction in Sternberger was disallowed because the possibility that the charity would not take was more than negligible.72
64. See id. at 193 (emphasizing that the focus of the so-remote-as- to-be-negligible test is on whether the charity is truly assured the grantor’s bequest). 65. See id. at 198 (noting under the terms of the will, the daughter had a $2,000,000 incentive to remarry and have children). 66. See id. at 188 (providing the terms of the trust). 67. See id. at 198 (explaining the daughter’s incentive to remarry, illustrating that the chances the charity won’t take are not very remote). 68. See id. (noting that the actuarial tables become less dependable to the extent a person can defeat a condition of the charity taking). 69. See id. at 199 (“This Court finds no statutory authority for the deduction from a gross estate of any percentage of a conditional bequest to charity where there is no assurance that charity will receive the bequest or some determinable part of it.”). 70. See id. (“Where the amount of a bequest to charity has not been determinable, the deduction properly has been denied.”). 71. See id. (“Where the amount has been determinable, the deduction has, with equal propriety, been allowed where the designated charity has been sure to benefit from it.”). 72. See id. at 199 (disallowing the deduction because the charity had a more than negligible chance of not receiving the bequest). 646 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
This case set the stage for future definitions and applications of the so-remote-as-to-be-negligible standard.73 Not only did it define the so-remote-as-to-be-negligible standard as “negligible” or “highly improbable”, but it also addressed how and to whom the standard would be applied.74 According to the Sternberger Court, the focus should be on the grantee/charity and the likelihood of the condition occurring should be evaluated through subjective factors, not just actuarial tables.75
2. United States v. Dean
Shortly after Sternberger, the Court of Appeals for the First Circuit further addressed how the so-remote-as-to-be- negligible standard should be defined.76 In United States v. Dean, the decedent’s estate would make bequests to charity if the decedent’s sister, age 82 at the time of the decedent’s death, survived the decedent’s daughter, age 67, and daughter-in-law, age 68.77 Using actuarial tables, the court provided the likelihood of the sister surviving the daughters was one in eleven.78 Ultimately the court held the likelihood of the sister surviving was not so remote as to be negligible and disallowed the deduction.79
73. See U.S. v. Dean, 224 F.2d 26, 29 (1st. Cir. 1955) (explaining the Sternberger analysis and using Sternberger as a basis for the Court’s own analysis). 74. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 193–94 (1955) (defining so-remote-as-to-be-negligible and explaining that the focus of the standard is on the grantee’s odds of taking). 75. See id. at 194, 198 (explaining that the focus of the so-remote- as-to-be-negligible is on the grantee’s chance of taking and placing more weight on subjective factors than less reliable actuarial tables). 76. See Dean, 224 F.2d at 29 (applying the so-remote-as-to-be- negligible standard). 77. See id. at 27 (providing the terms of the condition on the testamentary gift). 78. See id. (calculating the likelihood that the 82-year-old woman would survive the 67- and 68-year-old women). 79. See id. at 29 (deciding that one in eleven is not so remote as to be negligible). SHIFTING USE 647
The court in Dean acknowledged the difficulty of articulating when a condition is so remote as to be negligible.80 Because of this inability to draw lines, the court suggested applying the standard on a case-by-case basis.81 During this case- by-case evaluation, a court must only consider Congress’s intent to encourage testators to give to charities.82 Applying this suggested analysis, the Dean court compared the facts in Sternberger to those in Dean.83 It found the element of volition to be the main distinction between the two conditions.84 In Sternberger, the element of volition was that the donation to charity would not be made if the decedent’s daughter remarried and left issue.85 The condition in Dean, however, was contingent upon the longevity of a person, which the court said has no volitional element.86 The court reasoned that this lack of volition allowed the court to rely more on statistical evidence, like actuarial tables.87 The Dean court also attempted to provide its own definition for the so-remote-as-to-be-negligible standard.88 Warning that its definition is subjective, the court defined “so remote as to be negligible” to mean “a chance which persons generally would disregard as so highly improbable that it might
80. See id. (“The line between those chances which are so remote as to be negligible and those which are not lies somewhere between these extremes. We cannot say exactly where.”). 81. See id. (endorsing the evaluation of cases individually to see whether a condition is so remote as to be negligible). 82. See id. (“And there is no standard to guide us except our estimate of the extent of the encouragement tax-wise which Congress wished to give testators to make gifts to charity.”). 83. See id. at 28 (“. . . the Sternberger case [does not] rule this one, for here the chance that charity will take does not depend upon the probability of anyone having issue, a matter involving an element of volition.”). 84. See id. (comparing the evaluation of the condition in Sternberger with the facts in Dean). 85. See id. (distinguishing the Dean condition from the Sternberger condition); see also Comm’r v. Estate of Sternberger, 348 U.S. 187, 197–98 (1955) (discussing the “inducement to remarry”). 86. See Dean, 224 F.2d at 28 (“In this case the chance that charity will benefit depends entirely upon the relative longevity of three persons, a matter unaffected by volition or personal inducement . . . .”). 87. See id. (noting that in this case “statistical data is not subject to distortion by any individual’s self-interest”). 88. See id. at 29 (defining the so-remote-as-to-be-negligible standard). 648 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) be ignored with reasonable safety in undertaking a serious business transaction.”89 This definition does raise the question, however, of why a condition would exist in the agreement, if it could reasonably and safely be ignored in a business transaction? Despite this irony, this definition based on a propensity to ignore or dismiss is applied in several other cases dealing with the so- remote-as-to-be-negligible standard.90
3. Estate of Woodworth v. Commissioner
The Tax Court in Estate of Woodworth v. Commissioner supplied a slightly different definition of the so-remote-as-to-be- negligible standard to supplement the Dean definition.91 The Woodworth court defined the so-remote-as-to-be-negligible standard as: “a chance which every dictate of reason and common sense would justify an intelligent person in disregarding as so highly improbable and remote as to be lacking in reason and substance.”92 Like the Dean definition, this definition raises the question as to why the condition would exist in the agreement if it is “so highly improbable” to occur. The decedent in Woodworth directed her trustees to use her estate to build a hospital in Spartanburg, South Carolina, where no hospital currently existed.93 This term implied that she did not imagine a condition where the hospital would not exist.94 The direct instruction to establish the hospital would create the
89. See id. (emphasizing the high improbability that is required to meet the so-remote-as-to-be-negligible standard). 90. See, e.g., Hamilton Nat’l Bank of Chattanooga v. United States, 236 F. Supp. 1005, 1016 (E.D. Tenn. 1965) (defining the so-remote-as-to- be negligible standard to include a chance “so highly improbable that it might be ignored with reasonable safety in undertaking a serious business transaction”); Estate of Woodworth v. Comm’r, 47 T.C. 193, 197 (1966) (defining the standard based on what an intelligent person could disregard as being so highly improbable that it lacks any substance). 91. See Woodworth, 47 T.C. at 197 (comparing the court’s definition in Dean to the definition provided by the Tax Court). 92. Id. 93. See id. at 195 (presenting a condition of the trust). 94. See id. at 196 (noting the estate transfer was a certainty upon Woodworth’s death). SHIFTING USE 649 charity that could take the gift.95 When the co-executors of the decedent’s estate filed the estate tax return, they claimed a charitable deduction for the amount in the trust allocated for the establishment of the hospital.96 The Commissioner filed a notice of deficiency however because “it has not been shown that there has been or will be an effective transfer of funds” to establish the hospital.97 So in Woodworth, the condition depended upon whether a hospital would actually be established in Spartanburg.98 The court found the possibility of no hospital was more than negligible, because the charity itself (the hospital) had not yet been established.99 The implied condition requiring the actual establishment of the hospital necessitated an application of the so-remote-as-to- be-negligible standard.100 The previous cases examined thus far included express conditions.101 With this introduction of implied conditions, the court provided a new definition for the so-remote- as-to-be-negligible standard, based on high improbability, and so “remote as to be lacking in reason and substance.”102 Interestingly, the court also noted “there is nothing absolute or certain with respect to the fact that a Catholic hospital might or might not come into existence and, therefore, is not so remote as to be negligible.”103 This emphasis on certainty seems to
95 See id. (explaining that the donation would be an unconditional gift to help in building a Catholic hospital in Spartanburg). 96. See id. at 195 (discussing the executor’s action in response to the terms of the trust). 97. See id. (explaining the reasoning of the Commissioner when he issued a notice of deficiency against the estate). 98. See id. at 195–96 (“[S]ince the trustees could not use the fund for purposes other than those stated in the will and until steps were taken to establish a Catholic hospital, the fund would lie idle and for the use of no one.”). 99. See id. at 196 (discussing why the condition did not meet the so-remote-as-to-be-negligible standard). 100. See id. (establishing that if the bequest is conditional the so- remote-as-to-be-negligible standard is applied). 101. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 188 (1955) (noting the express condition in the will that must be met before the charitable donation transfers); see also United States v. Dean, 224 F.2d 26, 27 (1st. Cir. 1955) (explaining the express condition in the decedent’s will). 102. See Woodworth, 47 T.C. at 197 (defining the so-remote-as-to- be-negligible standard). 103. See id. (noting the uncertainty of the hospital ever actually coming into existence). 650 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) contradict the court’s earlier statements that the so-remote-as-to- be-negligible standard is associated with high improbability.104 The court in Woodworth was the first to raise the idea of certainty when evaluating with the so-remote-as-to-be-negligible standard.105 It was the lack of certainty here which caused the denial of the deduction.106 Yet, if an outcome is uncertain, like the establishment of a hospital, does it not create a lesser likelihood of it occurring? The court’s emphasis on lack of certainty confuses the prior applications of the standard seen in Sternberger and Dean.107 In those cases, there was not a focus on certainty, but rather a focus on the types of factors which may influence the so- remote-as-to-be-negligible evaluation, like the likelihood of the charity/grantee taking, and whether an element of volition is required in order to meet the condition.108 The actual text of the definition of the so-remote-as-to-be-negligible standard offered in
104. See id. (including improbability in the definition of the so- remote-as-to-be-negligible standard). 105. See id. at 197–98 (evaluating the charitable deduction based on a lack of certainty that the hospital would ever be built or that a fund would ever be created to do so). 106. See id. at 196 (“Thus the bequest had no semblance of certainty unless action was taken to establish either a hospital or a fund to build one.”). 107. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 194 (1955) (“Section 81.46(a) today yields to no condition unless the possibility that charity will not take is ‘negligible’ or ‘highly improbable.’”); see also United States v. Dean, 224 F.2d 26, 29 (1st. Cir. 1955) (defining the standard to mean “a chance which persons generally would disregard as so highly improbable that it might be ignored with reasonable safety in undertaking a serious business transaction”). 108. See Sternberger, 348 U.S. at 194, 198 (explaining that the focus of the so-remote-as-to-be-negligible is on the grantee’s chance of taking and other subjective factors); see also Dean, 224 F.2d at 28 (discussing the role of volition in evaluating the so-remote-as-to-be-negligible standard). SHIFTING USE 651
Woodworth,109 however, is similar to the definition in Dean.110 The application of the standard is where they differ.111
4. Hamilton National Bank of Chattanooga v. United States
Hamilton National Bank of Chattanooga v. United States sheds light both on the history of the definition of the so-remote- as-to-be-negligible standard and its application.112 In contrast to Woodworth, it emphasized that the standard should not rely on precision or certainty.113 The decedent in Hamilton left his son a life interest in a testamentary trust.114 Upon the son’s death, one-fourth of the trust corpus was to go to the issue of his son, and the other three- fourths were to go to designated charities, and the trust would terminate.115 The decedent’s son died two years after his father with no surviving issue.116 The trustee filed an estate tax return after the son’s death, claiming a deduction for charitable contributions, but the Commissioner assessed a deficiency against the trustee, claiming the possibility of the son having issue after the death of his father did not meet the so-remote-as- to-be-negligible standard.117 The court held in favor of the trustee,
109. See Woodworth, 47 T.C. at 197 (defining the so-remote-as-to- be-negligible standard as “a likewise chance which every dictate of reason and common sense would justify an intelligent person in disregarding as so highly improbable and remotes as to be lacking in reason and substance”). 110. See Dean, 224 F.2d at 29 (defining the so-remote-as-to-be- negligible standard as “a chance which persons generally would disregard as so highly improbable that it might be ignored with reasonable safety in undertaking a serious business transaction”). 111. See Woodworth, 47 T.C. at 197–98 (denying the charitable deduction based on an analysis that focused on the certainty of a condition being met). 112. See Hamilton Nat’l Bank of Chattanooga v. United States, 236 F. Supp. 1005, 1012–14 (E.D. Tenn. 1965) (discussing the history and use of the so-remote-as-to-be-negligible standard). 113. See id. at 1014 (stating that the standard is not met by showing impossibility, but rather negligible possibility). 114. See id. at 1006–07 (providing the terms of the trust). 115. See id. at 1007 (describing the condition subsequent of the trust). 116. See id. (describing the absence of issue at the son’s death). 117. See id. (describing the actions of the trustee, and the Commissioner in response, after the son’s death). 652 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) stating the condition was so remote as to be negligible based on testimony from doctors who had examined the son and said that he suffered from cancer and would have a shorter life expectancy.118 The Government in this case tried to argue that the so- remote-as-to-be-negligible standard really meant impossibility.119 The government argued impossibility because it was an earlier standard used before the so-remote-as-to-be-negligible standard was included in the regulations.120 It also applied a definition from a 1935 case, where impossibility was defined as a “negligible chance of not vesting.”121 The court in Hamilton did not accept the Government’s reasoning.122 Considering the Sternberger case, the court noted that the impossibility argument did not arise in the Supreme Court.123 Additionally, it provided its own logic to explain why impossibility and so remote as to be negligible are not the same thing: “[w]hile ‘impossibility’ and ‘no possibility’ may be accurate synonyms, and while ‘impossibility’ and ‘possibility’ may be accurate antonyms, ‘negligible possibility’ is not an accurate synonym of either.”124 The Government also tried to argue that in order to meet the so-remote-as-to-be-negligible standard, there must be some “precise predictability” with the condition to determine if it is so remote as to be negligible.125 This followed the Woodworth
118. See id. at 1017 (explaining that the likelihood of the son having issue was so remote as to be negligible and providing reasons for this evaluation). 119. See id. at 1012 (contending the so-remote-as-to-be-negligible standard to be equivalent to the former impossibility test used before the so- remote-as-to-be-negligible language was included in the regulations). 120. See id. (citing case law decided before the so-remote-as-to-be- negligible standard was promulgated which defined impossibility as “a ‘negligible’ chance of not vesting”). 121. See id. (citing City Bank Farmers’ Trust Co. v. United States, 74 F.2d 692 (C.A.2d 1935), for this definition of impossibility). 122. See id. at 1014 (asserting that the court does not “interpret pre-1939 cases relied upon by the Government as defining ‘impossibility’ to mean ‘possibility . . . so remote as to be negligible’”). 123. See id. at 1013 (“This Court does not interpret the Sternberger case as holding that ‘possibility . . . so remote as to be negligible’ is the same as ‘impossibility.’”). 124. See id. at 1014 (explaining why impossibility and so-remote-as- to-be-negligible cannot be applied as the same standard). 125. See id. at 1010 (outlining the government’s arguments). SHIFTING USE 653 emphasis on certainty about the completion of the hospital, as well as other cases that used actuarial tables to quantify the condition.126 However, the Hamilton court rejected this correlation.127 Instead it explained that the so-remote-as-to-be- negligible standard operates independently of any precise predictability because it would make the so-remote-as-to-be- negligible standard rather useless.128 The predictability itself would negate the possibility of some condition being so remote as to be negligible.129 The court in Hamilton also presented a third possible definition for “so remote as to be negligible:”
A negligible possibility is a possibility that would in the ordinary and reasonable affairs of men be disregarded in arriving at a present valuation of a future remainder interest in a serious business transaction, with no reduction in the value of the remainder interest being made by reason and the existence of such possibility.130
This definition, in comparison to the others offered in Sternberger and Dean, emphasized valuation as a factor when reviewing the condition.131 Additionally, the Hamilton court clarified that impossibility does not define the so-remote-as-to-be-negligible standard.132 All definitions provided thus far incorporated some element of reasonable dismissal from the parties involved in
126. See id. (noting the other cases that the Government relied on for its argument that the so-remote-as-to-be-negligible standard had to show precise predictability). 127. See id. at 1011 (rejecting the use of “presently ascertainable” when evaluating under the so-remote-as-to-be-negligible standard). 128. See id. (“If the survival or non-survival of issue is ‘precisely predictable’ or even ‘reliably predictable’ then it is either clearly possible or clearly impossible, in which event ‘negligible possibility’ becomes meaningless.”). 129. See id. (providing an additional reason as to why the use of precise predictability is not appropriate when applying the so-remote-as-to-be- negligible standard). 130. Id. at 1016. 131. See id. (noting the importance of the present valuation in defining the so-remote-as-to-be-negligible standard). 132. See id. at 1014 (emphasizing that impossibility is not the same as possibility so remote as to be negligible). 654 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) drafting the terms of the condition.133 A drafting party would have no reason to include a condition if the occurrence of the condition was so remote as to be negligible. This subsequently raises the question of when an express condition would ever meet the standard. Expressing the condition implies that the drafting parties thought it was reasonable to include it in the agreement. These three definitions (Sternberger, Dean/Woodworth, and Hamilton) provided the background for defining the so-remote-as- to-be-negligible standard in the federal income tax context for qualified conservation contributions.134
B. Federal Income Tax Cases
Even though the Treasury Regulations did not allow for deductions for conservation easements until 1980,135 they included the so-remote-as-to-be-negligible standard for other charitable donations reliant on conditions.136 These cases, and those specifically addressing conservation easements, developed the definitions and applications of the so-remote-as-to-be- negligible standard and set the background leading into Graev v. Commissioner.137
133. See id. at 1016 (defining the standard to mean a reasonable disregard of the condition in a contract or transaction because the chances of the condition happening are so remote); Estate of Woodworth v. Comm’r, 47 T.C. 193, 197 (1966) (defining the standard to mean reasonable disregard of the condition); U.S. v. Dean, 224 F.2d 26, 29 (1st. Cir. 1955) (defining the standard to mean reasonable disregard of the condition); Comm’r v. Estate of Sternberger, 348 U.S. 187, 194 (1955) (defining the standard to mean “negligible” or “highly improbable”). 134. See Briggs v. Comm’r, 72 T.C. 646, 656–57 (1979) (citing many of these cases in the estate tax context as instructive for federal income tax cases). 135. See Act of Dec. 17, 1980, Pub. L. No. 96-541, 94 Stat. 3204 (codified as amended at 26 U.S.C. § 170(h) (2014)) (allowing deductions for conservation easements). 136. See Treas. Reg. § 1.170A-1(e) (1972) (utilizing the so-remote- as-to-be-negligible standard for conditional charitable donations); Treas. Reg. § 1.170A-7(a)(3) (1972) (stating that deductions are not disallowed simply because of the conditional nature of the donation because of the so-remote-as-to-be- negligible standard). 137. See Graev v. Comm’r, 140 T.C. 377, 390–94 (2013) (referencing cases such as Briggs and Sternberger in support of the court’s analysis). SHIFTING USE 655
1. Early Cases Addressing the So-Remote-as-to-be-Negligible Standard
a) Briggs v. Commissioner
One of the earliest federal income tax cases to address the so-remote-as-to-be-negligible standard was Briggs v. Commissioner.138 This 1979 case did not deal specifically with conservation easements, but rather with a donation of land in fee simple subject to a condition subsequent.139 If the condition was not met, the original landowner would have right of reentry or the power to terminate the donation.140 The condition was that property would be donated to a group of Native Americans to be used for establishment of a cultural, educational, and medical center.141 The Briggs court evaluated the donation of the land under the so-remote-as-to-be-negligible standard used in section 1.170A-1(e).142 It defined the standard with the definitions seen in the estate tax cases above, including both the Dean and Sternberger definitions.143 The court evaluated the condition based on the reasonableness of the grantor and grantee’s actions.144 In this case especially, the court examined possibility of satisfying the condition through the grantor and grantee’s interests and their ability to sustain the goal of the condition: to
138. See Briggs, 72 T.C. at 656–57 (1979) (considering the so- remote-as-to-be-negligible standard in the federal income tax context)). 139. See id. at 655 (explaining that the petitioner’s gift contained a condition subsequent). 140. See id. (“Petitioner has the right of reentry or power of termination if the condition is broken.”). 141. See id. at 649 (explaining the terms of the condition). 142. See id. at 653 (applying the so-remote-as-to-be-negligible standard found in section 1.170A-1(e)). 143. See id. at 656–57 (providing estate tax background on the so- remote-as-to-be-negligible standard). 144. See id. at 657–58 (applying the Dean and Woodworth definition to the grantor’s and grantee’s reasonable ability to maintain and protect the easement). 656 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) build a cultural, educational, and medical center.145 With respect to the grantor, the court emphasized that the grantor did little to ensure that the center would be built on the property: it provided no funds for the creation of the center, and when the gift was made, no form of financing was available.146 Turning to the grantees, the court found they possessed no experience in fundraising or receiving grants.147 With this review, the court held that the likelihood of the condition being left unsatisfied was more than so remote as to be negligible.148 Along with both parties lacking the business acumen to establish a center, the court asserted that the petitioner had the intention to take back the property if the condition was not satisfied.149 It also predicted that the grantee would easily dissolve if it had difficulty satisfying the condition.150 So the court, in reviewing the likelihood of the condition, looked at the financial and managerial acumen of the parties, as well as their intentions.151
b) 885 Investment Co. v. Commissioner
Another major Tax Court case to address charitable contribution deductions was 885 Investment Co. v.
145. See id. at 656–59 (addressing the terms of the condition and the grantor and grantee’s ability to fulfill the request to establish a cultural, educational, and medical center). 146. See id. at 657 (“[P]etitioner did not provide funds for the establishment of the center, and at the time the gift was made, no financing . . . was readily available. . . . Petitioner failed to produce any new evidence that funds to establish the center were forthcoming; there was a good chance that the center might never come into existence.”). 147. See id. at 658 (describing the lack of business and managerial experience for the individuals acting on behalf of the grantee). 148. See id. (“We conclude, however, that on the date of the gift there was more than a negligible possibility that the desires of the board of directors [for the grantee] might become frustrated by the conditions imposed . . . .”). 149. See id. at 656 (“If ANIOFI [grantee] failed to use the ranch for the establishment of the center, petitioner [grantor] intended to retake the land and hold out for another group which was willing and able to establish the center.”). 150. See id. at 658 (predicting the ANIOFI board of directions may dissolve if unable to carry out condition). 151. See id. at 656–59 (assessing both the grantor’s and grantee’s ability to fulfill the condition). SHIFTING USE 657
Commissioner.152 The taxpayer wanted to donate a portion of its property to the city of Sacramento to develop a scenic corridor.153 It donated with the expectation that it would not have to maintain or develop the property.154 Aware of this expectation, the city included a condition into the agreement.155 If the city were unable to get the funding from the state to maintain and develop the highway, the property would be returned to taxpayer.156 The fact that the grantee, rather than the grantor imposed the condition is unique.157 The Tax Court found the grantee-imposed condition significant.158 Like the Briggs case, the court applied the so-remote-as- to-be-negligible definitions from Dean and Woodworth.159 Ultimately, the court held that the condition was not so remote as to be negligible.160 Resting its reasoning on the fact that the grantee had asked for the condition,161 the court saw this as evidence of a “realistic possibility” that the property would be
152. See 885 Inv. Co. v. Comm’r, 95 T.C. 156 (1990) (considering the so-remote-as-to-be-negligible standard in the context of a charitable contribution). 153. See id. at 158 (presenting the facts of the case). 154. See id. (“885 offered to donate to the city that portion of land within its scenic corridor; the donation was based upon 885’s understanding that it would not have the responsibility for developing and maintaining the scenic corridor.”). 155. See id. at 159 (describing the condition which the grantee requested to have in the agreement). 156. See id. at 159, 161 (describing how the condition allows for the grantee to revert the property back to the owner if the property is not used for a scenic corridor). 157. See id. at 159 (explaining that the city required the provision to potentially deed the property back to the grantor). 158. See id. at 162 (placing weight in the fact that the city put in this provision as an indication that the return of the property wasn’t so remote as to be negligible). 159. See id. at 161–62 (defining the so-remote-as-to-be-negligible standard as they were used in Dean and Woodworth). 160. See id. at 162 (asserting the possibility of the property being returned to the grantors was not so remote as to be negligible). 161. See id. (“The city insisted that 885 accept the return of the property if the city could not use it as a scenic corridor. . . [I]n light of the financial and legal uncertainties the city harbored, [this] is a clear indication that the return of the donated property to 885 was not so remote as to be negligible.”). 658 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) returned.162 As addressed earlier in the Dean case, the insertion of these conditions, which are cautionary of future events, ultimately provide a tipping point for the “so remote as to be negligible” analysis.163 Because the standard is defined as “highly improbable,” the fact alone that a condition was included based on a future event seems to set up the conditional contribution deduction for failure.164 Both Briggs and 885 Investment Co. introduce new approaches to applying the so-remote-as-to-be-negligible standard.165 The Briggs court not only evaluated whether the grantee would be able to take, but also whether the grantor was committed to carrying out the condition.166 This deviates from the original purpose for the standard seen in the estate tax cases; the so-remote-as-to-be-negligible standard was implemented to prevent grantors from receiving deductions even if the grantee/charity did not take.167 The 885 Investment Co. court highlighted that the grantee asked for the condition.168 This request, in comparison to a grantor’s inclusion of a condition, seemed to further sway the court into finding that the condition did not meet the so-remote-as-to-be-negligible standard.169 The
162. See id. (analyzing the city’s lack of funds in addition to its request for the condition to establish that the likelihood of the property being returned to 855 was more than negligible). 163. See id. at 162 (saying that the fact that the city was dependent on funding and included these provisions proved that the reversion was not “remote”). 164. See id. at 161 (defining “highly improbable” as a circumstance in which the ordinary businessperson would not consider the occurrence as a possibility of the deal). 165. See id. at 162 (evaluating the intent of the grantee in adding a condition in order to determine whether the standard is met); see also Briggs v. Comm’r, 72 T.C. 646, 656–59 (1979) (looking at financial and managerial acumen of the parties, as well as their intentions). 166. See Briggs, 72 T.C. at 654 (evaluating whether the grantor’s ability to take a reversionary interest in the donated property was actually “so remote so as to be negligible”). 167. See supra notes 48–51 and accompanying text (explaining the original purpose behind the so-remote-as-to-be-negligible standard). 168. See 885 Inv. Co. v. Comm’r, 95 T.C. 156, 161 (1990) (stating that the “so remote as to be negligible” standard could not be applied if a reversion to the grantor was not actually remote). 169. See id. at 162 (stating that the grantee’s request that the reversion clause be included meant that the grantee could foresee the donation being returned to the grantor). SHIFTING USE 659 grantee’s act represented a more intentional desire to include the condition.170 This pulled the condition further away from the so- remote-as-to-be-negligible requirement that a future event be so improbable that no reasonable party would consider it.171
2. Case Law on Conservation Easements and the So-Remote- as-to-be-Negligible Standard
a) Commissioner v. Simmons
Unlike what was seen in Briggs and 885 Investment Co., in Commissioner v. Simmons, the D.C. Circuit Court of Appeals found that the conditional qualified conservation easement deduction met the so-remote-as-to-be-negligible standard, and allowed the deduction.172 In this case, the grantor donated two façade easements to L’Enfant Trust (grantee), a tax-exempt organization in Washington, D.C. dedicated to historic preservation.173 The easement agreements included a clause allowing the grantee to abandon or make changes to the easements.174 The Commissioner argued this clause violated the perpetuity requirement under section 170(h)(5).175 The D.C. Circuit rejected the Commissioner’s position.176 The court held the change and abandonment clause did not violate the perpetuity requirement, but rather created a
170. See id. (providing the fact that the grantee may have foreseen the property reverting back to the grantor when they requested the condition’s inclusion). 171. See id. (explaining that the fact that the condition was included by the grantee made the reversion possible). 172. See Comm’r v. Simmons, 646 F.3d 6, 10–11 (D.C. Cir. 2011) (explaining why the right to abandon does not obviate the satisfaction of perpetuity and still allows the easement to stand up against the so-remote-as- to-be-negligible standard). 173. See id. at 8 (providing factual background). 174. See id. (“The deeds allow L’Enfant ‘to give its consent—e.g., to changes in a Façade—or to abandon some or all of its rights thereunder.”). 175. See id. at 9 (describing the Commissioner’s arguments). 176. See id. at 10 (“We conclude the easements meet the requirement of perpetuity in § 170(h)(5)(A).”). 660 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) safety net for the grantee.177 If a change ever arose where the grantee would need to alter the property (i.e. to have people live there), the clause would allow for those changes while still permitting the grantee to maintain as much of the conservation purpose as possible.178 The court also noted any grantee may fail on its obligation regardless of the abandonment clause seen here.179 The court even specifically acknowledged that the grantee (L’Enfant) could abandon its rights altogether, but based on its prior practice, it was so remote as to be negligible that the grantee would do so.180 The court also cited D.C. historic preservation laws, stating the laws bound the grantee of the conservation easement and allowed for the grantor’s easement to be protected.181 In addition to reaching a different conclusion, the D.C. Circuit in Simmons applied the so-remote-as-to-be-negligible standard in a different manner.182 The court cited neither the Dean nor the Sternberger definition.183 Instead it simply defined the standard as a “remote possibility.”184 In its analysis, the court put considerable weight into the reputation of the grantee, but barely discussed the grantor in the so-remote-as-to-be-negligible breakdown.185 The fact that there was only a change and abandonment clause on the conservation easement seems to be what allowed the so-remote-as-to-be-negligible argument to
177. See id. (“The clauses permitting consent and abandonment, upon which the Commissioner so heavily relies, have no discrete effect upon the perpetuity of easements . . . .”). 178. See id. (asserting that change and abandonment clauses can aid in maintaining the overall conservation purposes). 179. See id. (explaining that abandonment does not just occur as a result of a clause which allows it). 180. See id. (“L'Enfant has been holding and monitoring easements in the District of Columbia since 1978, yet the Commissioner points to not a single instance of its having abandoned its right to enforce.”). 181. See id. (describing the role D.C. historic preservation law plays in conservation easements). 182. See id. (requiring that any donated land must be subject to a perpetuity requirement for both the donor and the donee). 183. See id. (outlining the fact that the donated land must remain consistent with conservation purposes specified in the Code). 184. See id. at 10–11 (defining the so-remote-as-to-be-negligible standard). 185. See id. at 10–12 (upholding the deduction based on the grantee’s prior practices). SHIFTING USE 661 succeed.186 Both the reputation of the grantee and the supportive D.C. laws for historic preservation played a role in making any implied condition from the change and abandonment clause condition a remote possibility.187
V. Graev v. Commissioner, an Overview
In June 2013, the Tax Court issued its opinion on Graev v. Commissioner.188 It held that a façade conservation easement donation was not tax deductible because the donation included a side letter creating a conditional gift.189 The condition in the side letter allowed the grantee to return the grantor’s easement donation if the IRS decided that the donation was not deductible.190 The possibility of this condition arising was found to be more than so remote as to be negligible.191 The court applied the so-remote-as-to-be-negligible standard to the IRS, a party outside of the immediate grantor/grantee relationship.192 The condition itself rested on the decision of the IRS, and guaranteed that the conservation easement agreement would dissolve should the deduction be denied.193 This reliance on an outside third party, along with a condition that allows for an unraveling of the whole agreement, encourages aggressive use of qualified conservation contributions.194 A condition centered solely around tax deductions, and allowing for a refund if the deduction is denied,
186. See id. at 11 (stating that the “remote possibility” that donated property would be returned to the donee would not disallow the deduction). 187. See id. at 10–11 (noting the grantee’s interest in preserving the easement for conservation purposes and highlighting that even if the grantee dissolved, the easements will be transferred to another conservation organization). 188. See Graev v. Comm’r, 140 T.C. 377 (2013). 189. See id. at 409 (denying the deduction because the side letter established a condition which was not so remote as to be negligible). 190. See id. at 383 (describing the contents of the side letter). 191. See id. at 409 (arguing the side letter did not meet the so- remote-as-to-be-negligible standard). 192. See id. at 394–95 (analyzing the likelihood of the IRS to disallow the deduction). 193. See id. at 383 (providing the terms of the condition). 194. See Sims, supra note 21, at 59 (stating the process of allowing “before” and “after” valuations for contributions encourages valuations that do not adequately reflect the fair market value of the donation). 662 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) encourages aggressive valuation.195 Graev demonstrates that this type of “tax insurance” clause for conservation easements should not be permitted because it does not perpetuate any greater conservation purpose. These conditions only cater to the concerns of the grantor. In light of the Graev outcome, conservation easement donations should be irrevocable on the terms of deductibility. A. Background
The National Architectural Trust (“NAT”) reached out to Mr. Graev in the summer of 2004 and asked if he would be interested in donating a façade easement on one of his historic properties in New York City.196 Mr. Graev responded, expressing interest, but also concern because his accountants had alerted him of a recent IRS Notice that warned of “penalties and excise taxes” to those who make improper conservation easement donations.197 NAT assured Mr. Graev that the IRS Notice would not apply to the type198 of conservation easement donations that NAT offered.199 NAT even told Mr. Graev that it had been in contact with the IRS and that it had “no reasons to expect that [NAT] or any of the donations [NAT] has received (easement or cash) w[ould] be reviewed.”200
195. See id. at 58 (requiring that the deduction amount taken must match the amount of valuation on the return in order to promote the public interest). 196. See Graev v. Comm’r, 140 T.C. 377, 381 (2013) (describing NAT’s solicitation of Mr. Graev). 197. See id. at 8 (describing Mr. Graev’s concern as a result of the IRS Notice); see also IRS Notice 2004-41, supra note 6 (alerting taxpayers that abusive use of qualified conservation contributions could lead to penalties and excise taxes). 198. The IRS highlights two main types of problematic qualified conservation easements: (1) those that do not serve a valid public purpose or those where donor receives a greater financial benefit from the easement than the public, and (2) easements donated to charitable organizations where there charity in turn sells the easement for profit. See IRS Notice 2004-41, supra note 6 (addressing current issues with qualified conservation contributions). 199. See Graev, 140 T.C. at 382 (providing NAT’s assurances to Mr. Graev that his type of donation was not addressed in the IRS Notice). 200. See id. at 382–83 (contrasting NAT activities with those activities that usually caused IRS review). SHIFTING USE 663
Around this time, Mr. Graev also requested a “side letter” from NAT.201 He had neighbors who had donated façade easements to NAT and had received these letters as a part of NAT’s standard policy.202 NAT supplied him with a side letter which guaranteed: “In the event the IRS disallows the tax deduction in their entirety, we will promptly refund your entire cash endowment contribution and join with you to immediately remove the façade conservation easement from your property’s title.”203 The conservation easement deed did not include the promise made in this side letter.204 A few months after Mr. Graev had donated his easement to NAT, NAT contacted Mr. Graev to tell him that the Senate Committee on Finance planned to implement reforms on deductions for façade easements.205 Several months after that, NAT wrote Mr. Graev again, telling him that the “refund offer” in the side letter might adversely impact the deductibility of his donation and that he should seek tax advice on the refund offer.206 NAT also offered to rescind the refund offer to potentially preserve the deductibility of the easement.207 Mr. Graev chose not to withdraw the refund.208 The facts in the case did not elaborate as to why Mr. Graev chose not to withdraw.209
201. See id. at 383 (highlighting when Mr. Graev submitted his façade easement application to NAT, he also requested NAT write him a side letter emphasizing the standard NAT policy that there will be a refund if the donor’s deduction is disallowed). 202. See id. (“In a cover letter to NAT transmitting the application, Mr. Graev stated: ‘I will also be looking or the NAT to issue the ‘side’ letter we discussed (similar to the one being issued to my neighbors across the street).’”). 203. See id. (providing the text of NAT’s side letter to Mr. Graev). 204. See id. at 385 (“The deed did not expressly refer to the side letter or incorporate its terms.”). 205. See id. at 386 (describing NAT’s first communication to Mr. Graev after his donation that the Senate Committee on Finance planned to look in depth at the valuation of façade easements). 206. See id. (describing NAT’s second communication to Mr. Graev after his donation which warned him that the side letter’s refund offer may “adversely affect the deductibility of the cash contribution as a charitable gift”). 207. See id. (“Of course, if you determine that you would prefer that we withdraw the refund offer, which according to our attorney should restore the deductibility of your cash contribution, the Trust will promptly do so.”). 208. See id. (noting that Mr. Graev chose not to withdraw the refund). 209. See id (showing that such evidence is not included in the record). 664 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015)
This case arose in the Tax Court because Mr. Graev and his wife claimed deductions on the conservation easement donation.210 The IRS issued a notice of deficiency to the Graevs arguing “the noncash charitable contribution of a qualified conservation contribution is disallowed because it was made subject to subsequent event(s).”211 The issue before the Tax Court was whether Mr. Graev’s contributions to NAT would be deductible because they were conditional gifts.212
B. Tax Court’s Opinion
The Tax Court found in favor of the Commissioner, holding that the side letter created a conditional gift, whose condition was more than so remote as to be negligible.213 The court began its opinion by stating the law which qualifies Mr. Graev’s donation as a conservation contribution, including the three regulations which address the so-remote-as-to-be-negligible standard.214 In addition to including the so-remote-as-to-be-negligible definitions seen in Dean and Briggs (citing Woodworth), the court also emphasized the so-remote-as-to-be-negligible analysis should be made in light of “all the facts and circumstances.”215 This suggests an expansion from what had been seen in earlier cases where the analysis rested heavily on the actions and intentions of the grantee and grantor only.216 In fact, the Graev court began its
210. See id. at 386–87 (explaining why the IRS issued a notice of deficiency against the Graevs). 211. Id. at 387. 212. See id. (“The question now before the Court is whether deductions for Mr. Graev’s contributions of cash and the easement to NAT should be disallowed because they were conditional gifts.”). 213. See id. at 409 (“[W]e conclude that at the time of Mr. Graev’s contributions to NAT, the possibility that the IRS would disallow the Graev’s deductions for the contributions and, as a result, that NAT would promptly refund Mr. Graev . . . was not ‘so remote as to be negligible.’”). 214. See id. at 387, 393 (explaining Treas. Reg. §§ 1.170A-1(e), - 7(a)(3), -14(g)(3) and why they are relevant to Mr. Graev’s case). 215. See id. at 394 (presenting prior case law definitions of the so- remote-as-to-be-negligible standard and adding that “all facts and circumstances” should be considered). 216. See id. (adding “all facts and circumstances” to the analysis of whether the grantee’s reception of the easement would be defeated). SHIFTING USE 665 so-remote-as-to-be-negligible analysis with the IRS’s likelihood of disallowing the deduction and its intention to scrutinize conservation easements more closely.217 By beginning its analysis with the IRS’s actions and intentions, the court suggested the grantor and grantee are not the only parties who influence the determination of whether a condition is so remote as to be negligible.218 The court quickly noted that “it is self-evident that the risk of IRS disallowance was not negligible.”219 The court explained that Mr. Graev clearly foresaw the issue of deductibility, and that is why he requested the side letter.220 Mr. Graev’s actions did not fit in to the traditional definition of so- remote-as-to-be-negligible that establishes a standard of disregarding or ignoring the possibility of the condition occurring.221 Mr. Graev foresaw this issue of deductibility because he was aware of the increased IRS scrutiny on conservation easement contributions, from both the IRS Notice and the letters from NAT.222 While the IRS Notice did not specifically address the type of contribution Mr. Graev made, the court explained that the notice served to alert all grantors and grantees of qualified conservation contributions of the IRS’s heightened scrutiny.223 Mr. Graev’s initial email to NAT about the notice also supported the assertion that the IRS Notice applied to others outside of the specific examples the IRS cited.224 The side letter, instead of the conservation easement agreement, ended up being what activated the application of the
217. See id. (discussing the possibility that the IRS will disallow the deduction). 218. See id. (highlighting the potential for the IRS to disallow the deduction and for NAT to return the easement was not so remote as to be negligible). 219. Id. at 394. 220. See id. at 394–95 (explaining how Mr. Graev’s insistence on the side letter showed his ability to foresee the IRS denying deductibility). 221. See id. at 395 (“[Mr. Graev] did not ‘disregard’ or ‘ignore’ it, . . . but rather went out of his way to address it and hedge against it.”). 222. See id. (asserting that the IRS Notice indicated increased IRS scrutiny to all conservation easements). 223. See id. (emphasizing that the IRS Notice was a general warning against “improperly claiming charitable contribution deductions”). 224. See id. at 395–96 (asserting Mr. Graev’s email to NAT requesting a side letter indicates Mr. Graev’s understanding that the deduction could be disallowed). 666 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) so-remote-as-to-be-negligible standard.225 It also simultaneously destroyed Mr. Graev’s chances at meeting the so-remote-as-to-be- negligible standard.226 Mr. Graev wanted the side letter to ensure that he would not be harmed as a result of his transaction with NAT.227 At the same time, the fact that he wanted this letter shows that IRS disallowance of the deduction was a possibility.228 “[T]he risk that his corresponding deductions might be disallowed could not be (and was not) ‘ignored with reasonable safety in undertaking a serious business transaction.’”229 The fact that NAT issued these side letters as a matter of standard policy also shows that the grantee, not just the grantor, saw the disallowance of the deduction as a non-negligible risk.230 After establishing the disallowance of the deduction was more than so remote as to be negligible, the court then addressed NAT’s reliability to its promise if the condition was satisfied.231 Essentially, the court then asked if NAT could be expected to promptly refund Mr. Graev in light of a disallowance.232 The court believed that NAT would refund because along with the promise made in the side letter, the easement deed included a clause which allowed for NAT to abandon the easement.233 This is similar to the language seen in Simmons.234 Because the side letter represented an ability to act upon that right to abandon, the letter itself could be included as a part of the conservation
225. See id. at 404–05 (discussing the role of the side letter in triggering the application of the standard). 226. See id. (noting that “the possibility that NAT would actually abandon its rights was more than negligible”). 227. See id. at 398 (discussing the motives behind the side letter and its purposes). 228. See id. (“The very essence of a comfort letter implies a non- negligible risk.”). 229. Id. (citing 885 Inv. Co. v. Comm’r, 95 T.C. 156, 161 (1990)). 230. See id. (highlighting that it was standard policy for NAT to issue comfort letters to its donors). 231. See id. at 401 (assessing whether NAT would uphold the terms of its side letter to Mr. Graev). 232. See id. (analyzing whether or not the refund could be anticipated if the IRS disallowed the deduction). 233. See id. at 404 (holding that NAT would uphold the terms of the side letter because the “subscribed and recorded deed . . . reserved for NAT the power to do so”). 234. See Comm’r v. Simmons, 646 F.3d 6, 10 (D.C. Cir. 2011) (discussing the importance of clauses permitting abandonment). SHIFTING USE 667 easement.235 The court even argued that NAT would uphold its promise to refund if the side letter was found to be unenforceable.236 Regardless of this letter’s enforceability, NAT would voluntarily return the easement in the case of disallowance, and Mr. Graev would not have to make any affirmative actions to get his property returned to him as fee simple interest.237 The court found that there was no “non- negligible possibility” that NAT would fail to uphold its promises to Mr. Graev.238 According to the Tax Court, both the chance of disallowance and the chance of NAT upholding its promises was more than negligible, preventing the conditional contribution from meeting the so-remote-as-to-be-negligible requirement.239 Mr. Graev did try to mitigate the strength of the side letter by relying on Commissioner v. Procter.240 He attempted to argue that the side letter was unenforceable as a result of Procter.241 On its face, this 1944 case from the Court of Appeals for the Fourth Circuit appears to be a corollary to Graev.242 The donor in Procter assigned his children remainder interests in two trusts, and these children were to receive their interests upon the death of the donor’s grandmother.243 The condition at issue in Procter was if a “federal court of last resort” determined that any part of the transfer in trust was subject to the gift tax, then that
235. See Graev v. Comm’r, 140 T.C. 377, 405–06 (explaining why the side letter can be considered a part of the conservation easement agreement). 236. See id. at 408–09 (describing NAT’s willingness to voluntarily remove the easement and interest in upholding its professional reputation). 237. See id. at 409 (“To decide that there was no non-negligible possibility that NAT would voluntarily extinguish the easement and return the cash would require us to find that, in order to induce Mr. Graev to make his contributions, NAT made cynical promises that it fully intended to break. Our record will not support such a finding . . . .”). 238. See id. (evaluating NAT’s ability to uphold the easement). 239. See id. (explaining how the actions of NAT and the side letter itself establish that the condition did not meet the so-remote-as-to-be-negligible standard). 240. See id. at 406 (discussing Mr. Graev’s use of Comm’r v. Procter, 142 F.2d 824 (4th Cir. 1944)). 241. See id. (noting how Mr. Graev attempts to use Procter to invalidate the side letter). 242. See Comm’r v. Procter, 142 F.2d 824, 827 (4th Cir. 1944) (discussing why the terms of the transfer could not avoid the gift tax). 243. See id. at 825 (explaining the terms of the trust). 668 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) transfer would not occur.244 This case is similar to Graev in that both conditions require the actions of parties outside of the grantor/grantee relationship and hinge on tax consequences.245 The Procter court rejected this condition for three different public policy reasons: (1) it discouraged the collection of the gift tax because attempts to enforce the tax would only inhibit collection of the tax; (2) it would “obstruct the administration of justice by requiring the courts to pass upon a moot case” in order to maintain the gift tax; and (3) the final judgment of the court under this condition would merely undo the gifts and subsequently, the judgment of the court itself to assess gift tax.246 The Graev court specifically defeated all three of these policy reasons in the context of Mr. Graev’s condition.247 Addressing the first reason, the court stated that the conditions in the NAT side letter would not prevent the collection of tax.248 Instead, the side letter allowed for a restoration to status quo, hardly creating a discouragement for the grantor.249 The court defeated the second reason by noting the reversion to the grantor would not defeat the court’s holding like it would in Procter.250 Mr. Graev was merely prevented from taking the deduction.251 He would not be able to escape tax liability altogether as a result of the IRS’s decision.252 Similarly, the Graev court defeated the third Procter reason by stating the reversion of the property as a result of the side letter would not inherently reverse the judgment of
244. See id. at 827 (describing the condition provided in the trust). 245. Compare Graev v. Comm’r, 140 T.C. 397, 394–95 (2013) (outlining the role of a potential disallowance of the deduction in determining the outcome) with Procter, 142 F.2d at 825 (4th Cir. 1944) (commenting on the role of the court as a third-party in determining the validity of the transaction). 246. See Procter, 142 F.2d at 827–28 (asserting why the condition is invalid on public policy grounds). 247. See Graev, 140 T.C. at 406–08 (providing an explanation as to why the Procter reasoning does not apply the side letter). 248. See id. at 406–407 (arguing that the side letter would not prevent the collection of tax). 249. See id. at 407 (explaining how the side letter’s condition would not contradict a holding to either allow or disallow a deduction). 250. See id. (“However, in this case, unlike Procter, the reversion to the donor would not be inconsistent with the court’s holding . . . .”). 251. See id. at 409 (explaining that the deduction was disallowed). 252. See id. (advising that the IRS would challenge the Graevs’ deduction). SHIFTING USE 669 the IRS.253 The IRS denial of a deduction would still operate regardless of the reversion of the façade easement to Mr. Graev.254 Mr. Graev’s use of Procter to argue the side letter was unenforceable is puzzling. He initially insisted on the side letter.255 Even after NAT offered to withdraw the offer of the side letter to potentially preserve the deduction, Mr. Graev chose to keep the side letter as a part of the agreement.256 His about-face arguing the letter unenforceable eliminates any reasoning as to why he insisted on the side letter in the first place.257 This switch appears to highlight Mr. Graev’s sole concern of tax deductibility.258 If the side letter were rendered unenforceable, it would eliminate the tax deduction condition evaluated under the so-remote-as-to-be-negligible standard.259 But by drawing a corollary between Procter and his own case, he only highlights that his motivations were similar to the grantors in Procter: he wanted the best tax situation possible.260 With this Procter corollary denied, the court concluded that “there was a substantial possibility that the IRS would challenge Graev’s conservation easement deductions.”261 This denial of deductions was likely because the IRS was on
253. See id. at 408 (explaining why the situation in Graev does not match up with the third policy rationale from Procter). 254. See id. (noting the return of the easement “would have no effect on the Graevs’ tax liabilities”). 255. See id. at 383 (requesting the side letter). 256. See id. at 386 (noting that Mr. Graev chose to keep the side letter after NAT offered to rescind it). 257. See id. at 401 (“The Graevs argue, however, that as a matter of law NAT could not be held to the promises it made in its side letter”). 258. See id. (suggesting that Mr. Graev is principally concerned with the tax consequences of the transaction). 259. See id. at 402–03 (explaining Graev’s argument, which was that the side letter was unenforceable and his contributions were not conditional as a result). 260. See Wendy C. Gerzog, Graev: Conditional Façade Easement, 140 TAX NOTES 1607, 1609 (2013), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2333211 (“It is ironic that the taxpayers in Graev cited to Procter to sustain their position. If anything, the facts in Graev reflect the very behavior so repugnant to the Procter court.”) (on file with the WASHINGTON AND LEE JOURNAL OF ENERGY, CLIMATE, AND THE ENVIRONMENT). 261. See Graev v. Comm’r, 140 T.C. 377, 409 (2013) (opining on the likely IRS treatment of the deduction). 670 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) heightened notice of abusive claims for conservation easement deductions, the condition was solely dependent upon tax consequences, and the court found that NAT was very likely to satisfy the condition of the side letter if the deduction was denied.262
VI. Lessons from Graev v. Commissioner
Within the scope of the existing cases that examine the so- remote-as-to-be-negligible standard, Graev was the only case which used a document outside of the conservation easement agreement to establish the condition, and the condition itself focused solely on tax consequences.263 Ironically, the side letter was meant to protect against disallowance of a deduction, not establish a greater likelihood of it occurring.264 This irony raises the question of what should a taxpayer do if it wants to get a deduction for a conservation easement? This paper argues that in order to justify a deduction for the high value conservation easements, these donations should be irrevocable based on tax consequences. Instead of failing to meet the so-remote-as-to-be- negligible standard, these conditions should be explicitly disallowed in the Treasury Regulations. The possibility of the IRS denying a deduction should not be considered a “remote future event.”265 Yet, insisting on irrevocability could weaken the incentive system of conservation easements altogether.266 Mr. Graev was trying to ensure that his donation was deductible; otherwise it seems he would have been unlikely to part with some of his ownership rights in the façade.267 Mr. Graev’s extensive efforts to
262. See Gerzog, supra note 260, at 1609 (discussing why the IRS disallowed the deduction). 263. See Graev, 140 T.C. at 383 (outlining the contents of the side letter). 264. See Gerzog, supra note 260, at 1609 (noting the purpose of the side letter). 265. See Treas. Reg. §§ 1.170A-1(e), -7(a)(3), -14(g)(3) (2014) (explaining that the so-remote-as-to-be-negligible standard is applied when conditions rely on future events). 266. See Gerzog, supra note 260, at 1609 (discussing the implications of factoring motive into allowing charitable deductions). 267. See Graev, 140 T.C. at 384–85 (detailing the structure of Mr. Graev’s contribution). SHIFTING USE 671 get the deduction raise the issue of whether blatantly seeking out tax deductions is a sound policy for making charitable contributions.268 Laura Gerzog’s review of Graev acknowledges that most people donate to charity in hopes that their donation creates a deduction.269 This desire encourages taxpayers like Mr. Graev to seek out opportunities for revocable donations based on deductibility.270 This revocability creates “tax insurance” for the grantor.271 A “tax insurance” system for qualified conservation contributions would encourage grantors to place aggressive valuations on their easements because they would only be returned to the status quo if the deductions were denied.272 This low risk of loss would encourage grantors to make qualified conservation contributions, but this low risk of loss would only continue to perpetuate the problems with conservation easements today including overvaluation.273 An allowance for revocable donations based on deductibility would create further inefficiencies to the charitable contribution system.274 If there were a surge of these conditional donations, charities would be subject to the decisions of the IRS and unable to fully utilize the property until the IRS had decided on the deduction or the statute of limitations period ran out.275 If deductibility were contested, then the charitable organizations may also feel obligated to support the taxpayer in litigation in order to preserve the charitable gift they now hold.276 Lastly, to
268. See Gerzog, supra note 260, at 1609 (questioning the prudence of the current policy on charitable deductions). 269. See id. (explaining the policy rationale behind conditioning donations based on deductibility). 270. See Remarks of Steven T. Miller, supra note 8 (commenting on the misuse of revocable donations). 271. See supra note 19 and accompanying text. 272. See Remarks of Steven T. Miller, supra note 8 (discussing the propensity of taxpayers to overvalue easements). 273. See id. (highlighting valuation as one of the problems with qualified conservation contributions). 274. See Gerzog, supra note 260, at 1609 (implying that allowing donors to alter donations after the IRS disallowed a deduction would be undesirable). 275. See id. (explaining that charities “would not know if they were receiving funds and could not rely on using those ‘donations’ until several years into the future”). 276. See id. (“If all charitable gifts were conditional on receiving a tax deduction, that limitation would place a heavy burden on charities.”). 672 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) allow revocability based on tax deductions for conservation easements would continue to expand the perpetuity issues surrounding conservation easements.277 The easement would be unable to exist in perpetuity until the issue of deductibility was resolved, and the original legislative purpose of conserving land for the public benefit would be diminished.278 Instead, the private benefit of the taxpayer would surpass the public benefit.279 Irrevocability on the other hand would force qualified conservation contributions subject to deductibility conditions to focus on conditions related to conservation in perpetuity. In establishing the risk that the contribution may not be deductible, grantors would be less aggressive in valuation and would be more likely to have the “donative intent . . . central to allowing a charitable deduction.”280 The burden on the taxpayer as a result of overvalued conservation easements may decrease with less aggressive transactions.281 The insistence upon irrevocability for tax purposes would also allow for a more concise definition of the so-remote-as-to-be-negligible standard.282 The Graev case highlighted the circular nature of a tax dependent condition: by focusing solely on deductibility, the issue became more than negligible thereby eliminating the possibility for a deduction.283 Excluding revocable, tax dependent conditions would help bring the focus so-remote-as-to-be-negligible analysis back to the ability
277. See generally Jay, supra note 36 (addressing the perpetuity issues with conservation easements particularly related to subsequent changes to the easement). 278. See S. REP. NO. 96-1007, at 9 (1980) (explaining the importance of conservation U.S. “natural resources and cultural heritage”). 279. See Sims, supra note 21, at 753 (acknowledging that many conservation easements benefit the grantor more than the public). 280. See Gerzog, supra note 260 at 1609 (citing United States v. American Bar Endowment, 477 U.S. 105, 117–18 (1986)) (explaining the key component of a charitable deduction). 281. See Sims, supra note 21, at 729 (noting that the taxpaying public suffers the costs from overvalued conservation easements). 282. See id. at 764 (commenting on the requirements for perpetual conservation restrictions). 283. See Graev v. Comm’r, 140 T.C. 377, 401 (2013) (“Given that non-negligible risk, Mr. Graev's contributions fell afoul of the section 170 regulations implementing the statutory requirements that a gift be effectively ‘made’, that it consist of an ‘entire interest’, and that it be a ‘qualified conservation contribution’”). SHIFTING USE 673 of the grantee charity to maintain the conservation easement in perpetuity.284 VII. Conclusion
The so-remote-as-to-be-negligible standard applied to qualified conservation contributions is only defined by case law, and as a result, has been applied broadly and inconsistently.285 Its original use in estate tax issues emphasized that reviewing courts should focus on whether the grantee charity will be able to take as a result of the condition.286 If the possibility of the charity not taking was so remote as to be negligible, then a deduction would be allowed for the charitable contribution.287 While federal income tax cases used the definitions of the so-remote-as-to-be-negligible standard supplied from its estate tax predecessors, the courts also began evaluating the role of the grantor under the standard.288 Deductibility not only depended on the grantee’s ability to maintain the easement.289 It also depended upon the grantor’s donative commitment to the easement.290 Evidence of a grantor seeking an easy refund, as opposed to a commitment to conservation, convinced courts to deny deductions.291 Graev v. Commissioner confused things because the condition subject to the so-remote-as-to-be-negligible standard
284. See Comm’r v. Estate of Sternberger, 348 U.S. 187, 194 (1955) (discussing the underlying purpose of the so-remote-as-to-be-negligible standard is to ensure that if a taxpayer gets a deduction, the charity will take also). 285. See Graev, 140 T.C. at 393–94 (outlining precedent relevant to the so-remote-as-to-be-negligible standard). 286. See id. (“The “so remote as to be negligible” phrase is the familiar term first used in the 1949 estate tax regulations . . . .”). 287. See id. (explaining how the so-remote-as-to-be-negligible standard developed). 288. See Briggs v. Comm’r, 72 T.C. 646, 659 (1979) (noting the importance of the grantor’s desire in making the gift). 289. See id. at 657–58 (discussing the grantee’s ability to comply with the conditions of the gift). 290. See id. at 659 (looking to the donor’s ultimate intent in determining the allowance of the deduction). 291. See generally id. (explaining the grantor’s intention to take back the property if the grantee failed to carry out the condition); Graev, 140 T.C. 377 (2013) (emphasizing Mr. Graev’s primary desire to have a tax deduction). 674 6 WASH. & LEE J. ENERGY CLIMATE & ENV’T 2 (2015) related solely to deductibility.292 The court did not even address the grantor or grantee’s ability to maintain the easement because the condition had nothing to do with the property itself.293 The Tax Court found that the deduction should be denied under the so-remote-as-to-be-negligible standard.294 Because of heightened IRS scrutiny, the court reasoned the denial of the deduction to be more than negligible.295 Also, the grantor’s efforts to preserve the deduction only highlighted that his concern about a greater than negligible chance that the deduction for the easement would be denied.296 The situation present in Graev raises the issue as to whether the so-remote-as-to-be-negligible standard and conditions for remote future events should be permitted when the condition is focused solely on deductibility.297 These conditions seem to benefit the grantor taxpayer, not to the public.298 Because these tax insurance conditions seem to extract any sort of altruistic donative intent from the transaction, the Treasury should promulgate regulations that prohibit revocability of the donations on the grounds of a denial of deduction.
292. See Graev, 140 T.C. at 401–02 (2013) (analyzing the possibility of a return of the contribution). 293. See id. at 408 (reviewing the terms of the easement). 294. See id. at 409 (explaining the court’s conclusions). 295. See id. at 397 (discussing the increased IRS scrutiny of these transactions). 296. See id. (commenting on Mr. Graev’s concerns with the deductibility of the easement and his subsequent actions). 297. See id. at 394 (“What is determinative under the section 170 ‘remote’ regulations is the possibility, after considering all the facts and circumstances, that NAT's reception and retention of the easement and cash would be defeated”). 298. See Gerzog, supra note 260, at 1609 (implying that permitting gifts to be conditioned on deductibility is not sound public policy).