Senator Orrin Hatch
Despite the constitutional requirement for the protection of property
rights, the America of the late twentieth century has witnessed
an explosion of federal regulation of society that has jeopardized
the private ownership of property with the consequent loss of individual
liberty. Under current federal regulations, thousands of Americans
have been denied the right to the quiet use and enjoyment of their
private property. Arbitrary bureaucratic enforcement of federal
and state regulatory programs has prevented Americans from building
homes, plowing fields, repairing barns and fences, clearing brush
and fire hazards, felling trees, and even removing refuse and pollutants,
all on private property.
Fairness and simple justice demand that Americans owning property
be entitled to the full use of their property. Ensuring compensation
for regulatory takings is the first step toward restoring the fundamental
right to own and use private property guaranteed by the Takings
Clause of the Fifth Amendment to our Constitution. That is why legislation
was proposed in the 104th Congress to protect private property owners
from overzealous regulators.
In the House of Representatives, legislators introduced H.R. 925,
the Private Property Protection Act. This Act was first introduced
as H.R. 9, an important component of the Contract With America.
Unlike the Senate bills, in which compensation is initially triggered
by whether a taking occurs within the meaning of Supreme Court precedent,
the H.R. 925 compensation provision is triggered in almost all situations
where property owners' use of land or water rights has been diminished
in value by twenty percent or more. Unlike the Senate bills, H.R.
925 is limited in scope to the administration of the Endangered
Species Act and the wetlands preservation program under section
404 of the Clean Water Act, as well as several other environmental
laws. The bill was voted favorably out of the House Judiciary Committee
on February 16, 1995, and passed the House on March 3, 1995.
On the Senate side, former Majority Leader Robert Dole introduced
S. 605, the Omnibus Property Rights Act, on March 23, 1995. Thirty-one
Senators joined Senator Dole as original cosponsors. Subsequently,
three Senators joined as cosponsors. The bill was referred to the
Committee on the Judiciary. The Committee held three days of hearings
on S. 605, polling the views of Senators, property owners, judges,
executive officials, academics, lawyers, and property rights advocates.
On December 21, 1995, a motion to favorably report S. 605 was approved
10-7 by the Judiciary Committee.
It is interesting to note the genesis of S. 605. At my urging,
the four different approaches designed to protect private property
from federal government intrusion, which were introduced separately
by several Senators, were merged in a single bill. It was believed
that the combination of these approaches would be far more efficacious
in protecting private property than in just relying on a single
strategy. This omnibus bill was the product of over a year and a
half of work and countless drafts and represents the most comprehensive
legislative mechanism to date to foster and protect the private
ownership of property.
The first substantive title of the bill encompasses property rights
litigation reform. This title establishes a distinct federal Fifth
Amendment "takings" claim against federal agencies by
aggrieved property owners, thus clarifying the sometimes incoherent
and contradictory constitutional property rights case law. Property
protected under this section encompasses all property defined by
the common law, as well as under state and federal law. This title,
unlike the House bill, is triggered when a taking, as defined by
the Supreme Court, occurs. Moreover, it allows for compensation
when the property, or "affected" portion of property,
is reduced in value by 33 percent or more.
This title also contains a nuisance "exception" to compensation.
It codifies that part of the 1992 Supreme Court decision in Lucas
v. South Carolina Coastal Council, which held that restrictions
on property use based on "background principles of the State's
law of property and nuisance" need not be compensated. By adopting
the Supreme Court's recent Lucas holding, S. 605 provides that only
innocent property holders are to be compensated for government takings.
Those that demonstrably misuse their property to pollute or to harm
public health and safety are not entitled to compensation under
the bill's nuisance provision.
Finally, this title also resolves the jurisdictional dispute between
the federal district courts and the Court of Federal Claims over
Fifth Amendment "takings" cases -- sometimes called the
"Tucker Act shuffle" -- by granting each court concurrent
A second title in essence codifies President Reagan's Executive
Order 12630. Under this title, a federal agency must conduct a private
property "taking impact analysis" before issuing or promulgating
any policy, regulation, or related agency action which is likely
to result in a taking of private property.
A third title establishes an agency administrative appellate and
compensation procedure for takings of real property during enforcement
and administration of both the Endangered Species Act and the wetlands
preservation program under section 404 of the Clean Water Act. These
Acts present special enforcement problems and an agency appellate
and compensation procedure allows the agency and the aggrieved party
the option to avoid litigation. A fourth title provides for alternative
dispute resolution in arbitration proceedings.
The bill provides for a complete election of remedies. If a decision
of an agency appeal is unreasonably delayed, an aggrieved party
may drop the appeal and litigate according to the terms of the Act.
These four titles, established by the Omnibus Property Rights Act,
together function to provide the property owner with mechanisms
to vindicate the fundamental constitutional right of private ownership
of property, while instituting powerful internal incentives for
federal agencies both to protect private property and include such
protection in agency planning and regulating.
On July 16, 1996, a partially streamlined substitute to S. 605
was introduced as S. 1954. This version of the Omnibus Property
Rights Act addressed many of the concerns of the original bill's
critics, who argued that the bill was too broad and costly. Among
other changes, the new bill: (1) narrowed the definition of property
to include only real property, including fixtures on land, such
as crops, timber, and mining interests, and water rights; (2) increased
the threshold amount that property or a portion of property need
be diminished in value before compensation for a taking be sought
from 33 to 50 percent; and (3) exempted civil rights laws from the
bill's purview, including those protecting persons with disabilities.
Despite these modifications, the structure and design of the new
bill remains the very same as the original Omnibus bill.
It is very significant that the nonpartisan Congressional Budget
Office, after year-long research, concluded in a study dated March
8, 1996 that the incentives built into the more expansive original
bill will encourage agencies to act more responsibly, that the administrative
cost of the bill would remain quite small, and that compensation
costs would remain even smaller. CBO noted that because all compensation
would be paid out of appropriated agency funds, the Budget Act's
pay-as-you-go procedures would not apply. Thus, the Omnibus bill
is by law "budget neutral."
CBO found that the costs of the Omnibus bill will diminish to an
insignificant level over time. This is predicated on the CBO finding
that the Omnibus bill contains powerful incentives, which over time
will reduce costs. These include: (1) the bill's bright line legal
standards, which better enable agencies to avoid takings disputes;
(2) the takings impact assessment requirement, which requires agencies
to analyze the affect of proposed regulations on property rights;
and (3) the requirement that compensation be paid from the agency's
budget, which inevitably will act as a deterrent to unconstitutional
and unlawful takings. Based on the extensive research and well-supported
estimate from the CBO, the Omnibus bill should cost no more than
$30 or $40 million a year for the first five years of implementation,
thereafter diminishing to insignificant amounts.
On July 16 of this year, CBO concluded that the recent changes
made to the Omnibus Property Rights Act would further reduce the
costs of the bill. Specifically, CBO observed that these changes
"would be likely to reduce the number of takings claims brought
against the United States through either administrative appeals
As of the date of the publication of this article, the Senate has
not taken action on S. 1954, although it may do so before its adjournment
this year. Nevertheless, H.R. 925, S. 605, and S. 1954, mark milestones
in legislative attempts to address the takings issue.