Natural preservation and the race to develop.

• Author: Dana, David A.

INTRODUCTION

The last twenty years have witnessed an explosion in natural preservation regulation--regulation aimed at preserving the ecological and aesthetic values of land in its natural or undeveloped state. There is every reason to think that the scope of such regulation will continue to grow.

Although efforts to enact natural preservation regulation have been successful, they have not been entirely uncontroversial. One of the greatest sources of controversy has been whether owners of undeveloped land should be compensated when the government limits or eliminates their developmental prerogatives in the interest of promoting natural preservation. The "battle lines" on the question of compensation for regulatory losses are clearly drawn. By and large, those ideologically and/or financially interested in promoting economic development over preservation--property owners, the business community, and intellectual critics of the modern regulatory state--have favored a generous compensation requirement.(1) Those interested in promoting preservation over economic development--environmentalists and sympathetic government officials and academics--have been hostile to any compensation requirement.(2)

This Article critically examines the assumption underlying the affiliation of pro-preservation groups with the strict anti-compensation position: that the absence of a compensation requirement best promotes efforts at preservation. The Article questions the conventional wisdom that "[t]he more often the government must pay for exercising control over private property, the less control there will be."(3)

The focus of my argument is what I call "the race to develop." The absence of a compensation requirement encourages property owners to accelerate development in order to avoid regulatory losses from future preservation regulation. By reducing or eliminating this race to develop, a compensation requirement actually may facilitate preservation efforts. Monetary payments would remove landowners' incentives to rush to develop and would thus help ensure that when a societal consensus in support of preservation of a natural resource has been reached, the resource is still in existence.

In focusing on the marketplace incentives created by a regime of uncompensated natural preservation regulation, this Article takes a different approach from that adopted by most other academic commentary on the issue of compensation for regulatory losses. The great bulk of the academic commentary either ignores or thinly addresses the marketplace incentives created by uncompensated regulation.(4) Almost all of the academic commentary, moreover, treats "regulation" as a unified or singular subject of study. The incentives in particular regulatory regimes and the resulting social costs warrant far more attention.(5)

The academic commentary regarding compensation has focused on the Fifth Amendment Takings Clause and, in particular, the doctrinal interpretations of that clause set forth by the United States Supreme Court. Part I of this Article demonstrates that existing Takings Clause doctrine fails to pose helpful questions. Compensation for regulatory losses must be justified, if at all, on grounds other than those squarely addressed in the case law.

Part II examines the social costs engendered by a regime of uncompensated natural preservation regulation. After exploring and rejecting the argument that a constitutional compensation requirement is justified by flaws in the political process that produce natural preservation regulation, the analysis turns to the race to develop. The race to develop robs society of the time needed to reach fully informed and fully considered decisions about the comparative social value of ecological preservation and development.

Part III explores possible responses to the socially costly race to develop. Specifically, Part III evaluates the comparative merits of four responses--a legislative program of ex post payments for regulatory losses, a judicially enforced constitutional guarantee of ex post payments, a legislative program of ex ante payments to the owners of as-yet undeveloped and unregulated land, and development taxes. Each of these responses holds some promise, although each also presents substantial difficulties. This Article does not argue that any one of these responses is "best" under all circumstances. Rather, the Article sets forth a framework for the commencement of a debate about the race to develop and the means available to eliminate it.

1. NATURAL PRESERVATION AND TAKINGS JURISPRUDENCE

   1. Three Basic Concepts

      The Fifth and, by incorporation, Fourteenth Amendments prohibit the taking of private property for public use without the payment of just compensation.(6) State constitutions contain identical or similar prohibitions.(7)

      The courts have found the application of the Takings Clause to physical seizures or occupations of private property relatively unproblematic: where the government permanently seizes or physically occupies property, it generally must pay.(8) Application of the Takings Clause to regulatory restrictions on the use of property, however, has proved extremely difficult for the American judiciary.(9)

      The doctrinal "test" for what constitutes a taking builds on three concepts: public harm, reasonable expectations, and diminution in market value. These concepts form the framework in which the courts have addressed the constitutional status of uncompensated natural preservation regulation.(10)

      The essence of the public harm concept is that when the use of property would cause harm to the public, the government may restrict that use without payment. No one has a right, it is said, to use property in a way that injures others. By contrast, when the public seeks to secure a benefit by restricting the use of property, compensation must be paid.(11)

      The public harm concept does capture some widely shared intuitions. No one seriously maintains that the government must compensate the owners of nuclear power plants when it enacts regulation designed to prevent accidental releases from those plants. Outside of a relatively narrow set of cases, however, there is likely to be a lack of consensus as to whether a restricted activity would be "harmful" to the public. The judicial opinions offer no guidance as to how to distinguish between public harm and public benefit in such cases. Conclusory assertions, presumably reflecting the courts' normative assessments of the activity at issue and its likely societal effects, are all that are offered.(12)

      The other two concepts that form the core of modern regulatory takings analysis--the reasonable expectations of the property holder and the regulatory diminution in value of the relevant property interest--sound somewhat less vague than the public harm concept. In fact, they are equally ill-defined.

      The Supreme Court has held that, in determining whether a newly enacted regulation has effected a taking requiring the payment of just compensation, courts should consider whether, at the time of purchase of a property, the purchaser reasonably expected that the property would not be subjected to new uncompensated regulation.(13) The presence of such a reasonable expectation strongly weighs in favor of a judicial finding of a regulatory taking.

      Unfortunately, the courts provide very little explanation for their holdings as to when it is and is not reasonable for a property owner to expect that she will be subject to uncompensated regulation in the future. As Jeremy Paul notes, the real question raised by "reasonable expectations analysis" is whether "a claimant has a strong normative case to support the expectation."(14) The Supreme Court has failed altogether to make the normative arguments necessary to explain, for example, its recent holdings that citizens have absolutely no reasonable expectation of constancy in pension regulations, whereas they have, at least in some circumstances, a reasonable expectation of constancy in building regulations.(15)

      The third concept, diminution in value, concerns the difference in market value of a property interest before the enactment of a regulation and its market value afterward.(16) The Supreme Court has differentiated sharply between cases in which there is a partial diminution in value and those in which there is a complete diminution in value. In partial diminution cases, the extent of diminution is merely one of a number of factors to be considered in determining whether a regulatory taking has occurred. By contrast, where there has been a total diminution in value, a court is much more likely to find a taking and order the payment of just compensation.(17)

      Whatever its conceptual weaknesses, this special treatment of total diminutions at least has the virtue of appearing "rule-like." In practice, however, the total diminution "rule" accommodates substantial judicial discretion.(18) First, the total diminution test, taken literally, would be meaningless. Even an absolute quarantine of a land parcel whereby everyone, including the owner, is barred entry does not permanently destroy all market value because there is always the prospect that the regulation will be lifted. Because "total diminution" cannot really mean what it says, it necessarily means "far too much diminution." The judge's assessment of what is "far too much" invariably brings into issue her assessment of the conduct being restricted and the social need animating the restriction.

      Second, the very idea of diminution of value requires a preregulation delineation of the property interest that is reduced in value by the regulation. An expansive definition of the relevant preregulation property interest enables a court to find that significant market value remains after the enactment of the regulation; a narrow definition of the relevant preregulation property interest, by contrast, enables a court to find that all or almost all value has...