Tradable emissions programs: implications under the takings clause.

I. INTRODUCTION

The Fifth Amendment of the United States Constitution provides that "private property [shall not] be taken for public use, without just compensation."(1) Supreme Court cases interpreting the Takings Clause generally fall into two classes.(2) In the first, the government authorizes a physical appropriation or actually takes title to the property;(3) compensation is generally required.(4) In the second, the government merely regulates the use of property, and compensation is required only if the "purpose of the regulation or the extent to which it deprives the owner of the economic use of the property suggests that the regulation has unfairly singled out the property owner to bear a burden that should be borne by the public as a whole."(5)

A critical issue in the first class of cases is whether the economic interest in question is in fact a property interest within the meaning of the Fifth Amendment. On many occasions the Supreme Court has entertained the question of what constitutes "private property" within the meaning of the Takings Clause, but a coherent theory has yet to emerge.(6) Likewise, the Court has not provided clear guidance with respect to the "essentially ad hoc, factual inquiries"(7) to be made in the second class of cases.(8) Thus, much uncertainty surrounds what constitutes a taking in either class of cases.

Amidst this uncertainty, federal and state regulatory agencies grappling to control air pollution are forging ahead with innovative methods of regulation. Tradable emissions programs are one of these new methods.(9) Under a tradable emissions program, the government issues emissions permits that companies may trade among themselves.(10) Several programs are already in place(11) and many more are in the planning phase.(12) As these programs are being developed, it is important for regulators to consider whether they are increasing the risk of a successful takings claim against the government if future policy warrants a decrease in the level of pollution allowable under the permits or if some companies are unable to obtain enough permits and must shut down.(13) If tradable emissions programs make the government vulnerable to successful takings claims, then the government could potentially be forced to pay huge sums of money as "just compensation" to polluters. Before embarking on programs that could place such a burden on the government's ability to curb air pollution, legislators and regulators need to consider and minimize the risks involved.

After a brief introduction to tradable emissions programs in theory and in practice, Part II of this Comment examines the possibility that these programs may render the government vulnerable to takings claims that fall into either of the two classes of takings cases. Part III analyzes whether tradable emissions permits are private property within the meaning of the Takings Clause, concluding that a court probably would not construe them as such. Part IV analyzes the regulation of property use through the regulation of tradable emissions permits, concluding that a takings claim under this theory is also unlikely to be successful under current law. Although a successful takings claim is unlikely under either of the two classes of cases, Part V offers recommendations for how government reg-ulators should implement tradable emissions programs to further reduce the likelihood of a successful takings claim. In addition, Part V suggests how courts should respond to a takings claim should one be brought.

II. AIR QUALITY REGULATION

The Clean Air Act (CAA)(14) governs air quality regulation in the United States. Under the CAA, the Environmental Protection Agency (EPA) administers several air pollution control programs, such as the acid deposition control program.(15) State agencies also administer air quality programs.(16) Both EPA and state agencies charged with air pollution regulation have a variety of regulatory techniques available, several of which are described below.

Air quality regulation is generally divided into two large groupings: command-and-control regulation and market-based regulation.(17) Under a command-and-control regime, regulators require specific emission levels for specific pollution sources.(18) Particular pollution control technologies or methods also may be specified.(19) Market-based regulation, on the other hand, aims to allow polluters to reduce pollution where pollution control is least costly.(20)

Emissions trading programs, a type of market-based air pollution regulation, can be broken down into four types: netting, bubbles, offsets, and banking.(21) Netting, also referred to as internal trading,(22) allows a firm to create a new source in a plant by reducing emissions from another source in the same plant.(23) A "bubble," named for putting an imaginary "bubble" over a number of sources, allows existing sources to trade emission reduction credits among themselves.(24) A program of offsets allows a firm to locate in a "non-attainment area" if the firm "offsets" new emissions by reducing emissions from existing sources by the same amount.(25) Finally, banking allows firms to save emission reduction credits for future use.(26)

EPA and various state agencies have moved cautiously in implementing these programs, beginning with a modest netting program in 1974.(27) With the 1990 CAA Amendments, Congress addressed acid deposition by establishing an emissions trading program for sulfur dioxide.(28) Only in 1994 did a multi-pollutant emissions trading program finally take effect.(29)

The CAA established a federal emissions trading program to control acid deposition.(30) The purpose of the acid deposition control subchapter is to reduce the annual emissions of sulfur dioxide and nitrogen oxides by requiring compliance with emission limitations.31 Deadlines for these emission limitations could be met by using an emission allocation and transfer system.(32) Under this system, the Administrator allocates allowances for each affected unit.(33) There is no cost to the recipient, except under section 416, which grants the Administrator power to hold special reserve allowances and to create a subaccount for direct sales.(34) Allowances allocated under the acid deposition control program can be transferred among owners or operators of the affected sources.(35)

The statute expressly provides that the acid deposition provisions do not create any property rights:

An allowance allocated under this subchapter is a limited authorization to

emit sulfur dioxide in accordance with the provisions of this subchapter. Such

allowance does not constitute a property right. Nothing in this subchapter or

in any other provision of law shall be construed to limit the authority of the

United States to terminate or limit such authorization.(36)

The legislative history confirms that Congress did not intend to create property rights within the meaning of the Fifth Amendment.(37)

State agencies creating their own tradable emissions programs for local air pollutants have followed the federal government's lead. In 1993, the South Coast Air Quality Management District (SCAQMD), the state agency responsible for air quality in the Los Angeles area, implemented a tradable emissions program called the Regional Clean Air Incentives Market (RECLAIM) Program.(38) Like the federal acid deposition statute, the RECLAIM regulations explicitly state that no property rights are created by the tradable emissions program. Specifically, the regulations state that a RECLAIM Trading Credit (RTC) is a "limited authorization to emit RECLAIM pollutants."(39) RECLAIM pollutants may be emitted only in accordance with District rules and state and federal law.(40) Moreover, although an RTC "may be bought, sold, traded or otherwise transferred or acquired in accordance with the provisions of this rule," and although an RTC may be used as collateral for indebtedness security, "[a]n RTC shall not constitute a security or other form of property."(41) The District reserves the right to amend the RECLAIM rules in response to program reevaluations pursuant to Rule 2015-Backstop Provisions, or at other times. Moreover, the SCAQMD Rules state, "[n]othing in the District rules shall be construed to limit the District's authority to condition, limit, suspend or terminate any RTCs or the authorization to emit which is represented by a Facility Permit."(42)

EPA is encouraging other states and regional associations of states to use market-based systems of pollution control.(43) In summer 1995, EPA proposed a rule that would provide approved generic rules that states could adopt to implement programs that allow open market trading of pollutants that cause ground-level ozone.(44) The preamble to the proposed rule, like the CAA,(45) explicitly states that "[the open market trading rule] would not confer property rights to the [permit] holder."(46)

As tradable emissions programs become more widespread, the issue of whether the government is vulnerable to takings claims will become increasingly important. A takings claim is plausible under either of the two classes of takings cases described in the Introduction. A takings claim under the first class of cases would be triggered by a change in government policy that reduces the level of pollution allowable under the permits. A claimant bringing suit under this theory would argue that the permits themselves are property and thus their depreciation in value should be compensated. A claim under the diminution in value theory would be triggered either by a change in government policy, as above, or by a situation in which the price of permits rose so high that an industry had no choice but to shut down. A claimant corporation bringing suit under this theory would argue that the regulation went "too far" in depriving the owner of economic use of its land. Parts III and IV examine the case law that would be relevant in a suit brought under each of these theories.

III. THE FIRST CLASS OF TAKINGS CASES: PHYSICAL APPROPRIATION OR TAKING OF TITLE

A. Physical Occupation

An industry claim for a compensable taking of tradable emissions permits based on a theory of physical occupation is unlikely to succeed, despite the Supreme Court's broad definition of what is considered a physical occupation of land.

Several cases illustrate the breadth of what is considered a physical occupation. In Kaiser Aetna v. United States,(47) for example, claimant Kaiser Aetna owned a pond that was private property under Hawaii's law.(48) After Kaiser Aetna dredged and filled the pond,(49) connecting it to navigable water,(50) the government claimed that it became subject to a "navigational servitude."(51) Acknowledging that the Commerce Clause confers upon Congress extensive authority over the nation's waters,(52) the Court nevertheless held that the "right to exclude" is a fundamental property right and that "the imposition of the navigational servitude in this context well result in an actual physical invasion of the privately owned marina."(53)

The result in Kaiser Aetna can be contrasted with the result in Pruneyard Shopping Center v. Robins,(54) decided one year after Kaiser Aetna. The California Supreme Court had held that California Constitutional provisions allow exercise of free speech on privately owned shopping center grounds.(55) The shopping center appealed to the U.S. Supreme Court, arguing, among other things, that the California Constitutional provisions constituted a taking under the Fifth Amendment. The Court held that the free speech provisions did not effect a taking.(56) The Court distinguished Kaiser Aetna, pointing out that unlike the claimants in Kaiser Aetna, the claimants in Pruneyard "failed to demonstrate that the 'right to exclude others' is so essential to the use or economic value of their property that the state-authorized limitation of it amounted to a 'taking.'"(57) Pruneyard thus represents a narrowing of the meaning of physical occupation and demonstrates that the Court will consider the economic impact of a regulation when determining whether or not a physical occupation exists.

While failure to demonstrate negative economic impact of a regulation may result in failure of a takings claim, as in Pruneyard, demonstration of negative economic impact is not necessary if the physical invasion involves permanent physical occupation of property. This principle was explained by Loretto v. Teleprompter Manhattan CATV Corp.,(58) in which the Court held that a New York law requiring a landlord to allow the installation of a cable box on his property constituted a physical invasion taking for which just compensation was due.(59) The Court stated that its holding was narrow and "affirm[ed] the traditional rule that a permanent physical occupation of property is a taking" because the "character of the invasion is qualitatively more intrusive than perhaps any other category of property regulation."(60) Thus, demonstration of the negative economic impact of the regulation is not needed if the government has physically invaded the claimant's property.

Two later cases added to the confusion about what constitutes an authorized physical occupation. Although the Court stated that the Loretto holding was narrow, Justice Scalia, writing for the majority in Nollan v. California Coastal Commission,(61) took an expansive view of the definition of a "permanent physical occupation."(62) He found that a permanent physical occupation of the Nollan's property had occurred when the California Coastal Commission conditioned the Nollan's coastal development permit on the provision of an easement across their beachfront.(63) By contrast, in Yee v. City of Escondido,(64) the Court declined to find that a local rent control ordinance, combined with a law that limited the ability of mobile home park owners to terminate a mobile home owner's tenancy, constituted a permanent physical occupation.(65)

Regardless of the murkiness of this area of law, however, a takings claim stemming from a decrease in the level of pollution allowable under the tradable emissions permits is unlikely to be construed as a physical appropriation. Because physical occupation cannot be "constructive," denying an industry the use of a permit cannot reasonably be viewed as a physical occupation even under the expansive view expounded in Nollan.

B. Taking Title

A successful takings claim is far more likely under a theory that the government has actually taken title to private permits. The two main considerations in exploring this issue are 1) whether the government creates a property interest in the tradable emissions permits when it issues them and, if so, 2) whether a taking has occurred when the government changes the value of these permits.(66) In general, a claimant's reasonable reliance on an implied property interest may affect a court's resolution of both of these issues.(67)

1. Kinds of Property Interests Other than Real Property that Are Protected by the Takings Clause

Before embarking on an analysis of the circumstances under which the government confers a property right, a discussion of what kinds of property fall within the meaning of the Fifth Amendment Takings Clause is in order. The meaning of "property" for Fifth Amendment purposes is not limited to real property. For example, in Lynch v. United States(68) the Court held that valid contracts are protected property interests under the Takings Clause.(69) Lynch was the beneficiary of war risk insurance that was annually renewable.(70) Congress attempted to abrogate the policy to relieve the United States from liability.(71) The Court distinguished the insurance policies from "[p]ensions, compensation allowances, and privileges [that] are gratuities" and held that "war risk policies, being contracts, are property and create vested rights"(72) that are protected by the Fifth Amendment. Crucial to the Court's holding in Lynch was that the war risk policies involved an agreement between the parties(73) and that the plaintiff had paid monthly premiums as consideration for the government's obligation.(74)

The Court has also held that leaseholds are compensable. In United States v. General Motors Corp.,(75) the government temporarily occupied a portion of a building that was under a long-term lease.(76) In holding that the tenant must be compensated, the Court squarely rejected limiting Fifth Amendment "property" to physical property:

It is conceivable that the [word "property" in the Fifth Amendment] was used

in its vulgar and untechnical sense of the physical thing with respect to

which the citizen exercises rights recognized by law. On the other hand, it

may well have been employed in a more accurate sense to denote the group of

rights inhering in the citizen's relation to the physical thing, as the right

to possess, use and dispose of it. In point of fact, the construction given

the phrase has been the latter. When the sovereign exercises that power of

eminent domain it substitutes itself in relation to the physical thing in

question in place of him who formerly bore the relation to that thing, which

we denominate ownership. In other words, it deals with what lawyers term the

individual's "interest" in the thing in question. That interest may comprise

the group of rights for which the shorthand term is a "fee simple" or it may

be the interest known as an "estate or tenancy for years," as in the present

instance.(77)

On the other hand, the leasehold in General Motors was a leasehold for real property.(78) If tradable emissions permits were considered leaseholds, they would be leaseholds unconnected to specific real property and might not receive the same degree of protection.(79)

The Court has also suggested that franchises may be constitutionally protected property, although the law in this regard is less certain. In Monongahela Navigation Co. v. United States,(80) the Court addressed whether the Monongahela Navigation Company, whose lock and dam were condemned, should be compensated for its franchise to collect navigation tolls.(81) The Court required compensation(82) but did not make clear whether the franchise itself was a vested property right(83) or whether the franchise was simply tied to the property and was protected for that reason.(84) The precedential value of the Court's decision in Monongahela is limited because the Court has since characterized the decision as resting primarily on the doctrine of estoppel.(85)

The Fifth Amendment protection afforded personal property is also unclear. In General Motors, the Court held that "for fixtures and permanent equipment destroyed or depreciated in value by the taking [of the building], the respondent is entitled to compensation."(86) But the personal property at issue in General Motors was clearly connected to the real property taken, and thus the question of compensation for personal property unrelated to real property was not answered. Dictum in Lucas v. South Carolina Coastal Council(87) suggests that if personal property is protected, it is protected to a lesser extent than real property:

[I]n the case of personal property, by reason of the State's traditionally

high degree of control over commercial dealings, [the property owner] ought

to be aware of the possibility that new regulation might even render his

property economically worthless (at least if the property's only economically

productive use is sale or manufacture for sale).(88)

Indeed, in Andrus v. Allard(89) the Court held that prohibiting commercial transactions involving parts of protected birds that had been legally killed did not violate the Fifth Amendment.(90)

How tradable emissions permits are characterized will be crucial to the outcome of a takings case brought against the government. If the permits are characterized as a contract, they will more likely be subject to takings law than if they are characterized as a leasehold, franchise, or personal property. Regardless of how they are characterized, however, the claimants will have numerous hurdles to overcome, as is discussed in the remainder of this section.

2. Government-Created Property Interests

The meaning of the word "property" in the Fifth Amendment is a federal question, but "it will normally obtain its content by reference to local law."(91) States have broad leeway in which to define what constitutes property.(92) In Ruckelshaus v. Monsanto Co.,(93) for example, the Court presented a helpful analysis of how a court should read state property law when deciding a Fifth Amendment takings claim.(94) Monsanto challenged the data-disclosure provisions of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA)(95) as a taking.(96) The Court accepted Missouri's definition of property as including health, safety, and environmental data as a trade-secret property right.(97)

The Court first acknowledged that the point of departure for determining whether an interest constitutes property within the meaning of the Takings Clause is state law: "[W]e are mindful of the basic axiom that `[p]roperty interests . . . are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.'"(98) The Court rejected EPA's argument that the Supremacy Clause requires that the FIFRA registration scheme be uniform and not depend on the state property law in place.(99) The Court stated:

This argument proves too much. If Congress can "pre-empt" state property

law in the manner advocated by EPA, then the Takings Clause has lost all

vitality. This Court has stated that a sovereign, "by ipse dixit, may not

transform private property into public property without compensation . . . .

This is the very kind of thing that the Takings Clause of the Fifth Amendment

was meant to prevent."(100)

Thus, the Court concluded that "to the extent that Monsanto has an interest in [Monsanto's] health, safety, and environmental data cognizable as a trade-secret property right under Missouri law, that property right is protected by the Takings Clause of the Fifth Amendment."(101)

Although the Court's conclusion rested mostly on state property law, the Court considered other factors in its analysis as well.(102) For example, relying on Armstrong v. United States,(103) Louisville Joint Stock Land Bank v. Radford,(104) Lynch v. United States,(105) and General Motors,(106) the Court noted that intangibles may be property for purposes of the Takings Clause.(107) In addition, the Court pointed out that trade secrets share many characteristics of tangible property.(108) These characteristics include assignability, availability to form the res of a trust, and the ability of trade secrets to pass to a trustee in bankruptcy.(109) Finally, the Court pointed out that "the manner in which Congress referred to trade secrets in the legislative history of FIFRA supports the general perception of their property-like nature."(110)

In Monsanto, state law and the Court's own conception of property both led to the same result: trade secrets are property. Monsanto makes clear that the Court's concept of property is important. It is unclear, however, how far the Court will be influenced by its own concept of property when that concept is contrary to state-defined rights. Monsanto teaches that the Court will look mainly to state law, but also to its own concept of property, to determine what qualifies as property within the meaning of the Fifth Amendment.

In United States v. Fuller,(111) the Court accepted Congress's pronouncement in the Taylor Grazing Act(112) that its provisions "shall not create any right, title, interest, or estate in or to the lands."(113) Claimant Fuller owned a ranch that was being condemned and had a Taylor Grazing Act permit to graze cows on adjacent federal land. In condemnation proceedings, Fuller sought to include in the value of his own land the incremental value accruing as a result of using that land in combination with grazing on the federal lands.(114) By a five-four vote, the Court held that the value of grazing on the adjacent land could not be included in the amount of compensation to Fuller.(115) The Court noted the general principle that "the government as condemnor may not be required to compensate a condemnee for elements of value that the Government has created, or that it might have destroyed under the exercise of governmental authority other than the power of eminent domain."(116) The Court did not, however, push this general principle to its "ultimate logical conclusion."(117) Instead, the Court extrapolated a "working rule" based on the distinction between value added to property by, for example, a completed public works project, and value added to fee lands by a revocable permit authorizing use of neighboring, government-owned lands.(118) Thus, the Court held that the Fifth Amendment does not require compensation for value based on the use of government lands neighboring the claimant's land.(119)

In short, the government enjoys wide latitude both to define rights as property, as in Monsanto, and to prevent rights from vesting as property, as in Fuller.

3. Presumption Against the Vesting of Rights

As a general rule, courts construe statutes strictly against the vesting of private rights.(120) This section explores some of the cases that illustrate this principle.

In Bowen v. Gilliard,(121) for example, recipients of Aid to Families with Dependent Children (AFDC)(122) challenged state regulations implementing the federal statute that authorized AFDC.(123) Under a 1975 amendment, the statute required persons applying for aid to assign to the state the right to receive child support payments for any child included in the "filing unit."(124) Before 1984, recipients could define their filing units to exclude children for whom they were receiving support payments.(125) Legislation in 1984 amended the AFDC statute to require that all children in the family be included in the family unit for purposes of eligibility and allotment of AFDC assistance.(126) Taken together, the 1975 and 1984 amendments resulted in decreased aid to some families in which one or more children received child support.(127)

The district court in Bowen held that by forcing a child to surrender his child support payments to the state in exchange for AFDC benefits to be shared among the entire family, the AFDC amendments constituted a taking.(128) Justice Stevens, delivering the Court's opinion, explained how a change in government regulation may seem like a taking, even though the same regulations would not have seemed like a taking had they been in place from the start:

Some perspective on the issue is helpful here. Had no AFDC program ever

existed until 1984, and had Congress then instituted a program that took into

account support payments that a family received, it is hard to believe that we

would seriously entertain an argument that the new benefit program constituted

a taking. Yet, somehow, once benefits are in place and Congress sees a need to

reduce them in order to save money and to distribute limited resources more

fairly, the "takings" label seems to have a bit more plausibility.(129)

Ultimately, however, the Supreme Court rejected the takings claim.(130) Justice Brennan's dissenting opinion in Bowen did not address the takings issue as such.(131) It focused instead on the government's interference with the plaintiffs' "fundamental liberty interest" in freedom of choice in matters of family life,(132) specifically the parent-child relationship.(133) Thus, no one on the Court supported the idea that the AFDC benefits were property.

Bowen presents a situation analogous to the tradable emissions permits situation. In both cases, the government confers a benefit. that may intuitively seem to be "property" within the meaning of the Fifth Amendment.(134) As Bowen illustrates, however, the Court will attempt to gain perspective by looking to the situation prior to the government's conferral of the benefit.(135)

A "willing recipient" notion likely drove the Court in Bowen. The Court stated that "[a]n assumption that child support payments to families receiving AFDC benefits are typically used for the entire family's needs is entirely reasonable."(136) In other words, the Court did not require that Congress distinguish between the money belonging to one child and the money belonging to the entire family. Thus, the Court could view the case as a simple matter of the government cutting back on benefits provided to the family. Some may argue that the "willing recipient" notion has less force in the context of tradable emissions permits, because industries had been emitting pollution long before tradable emissions programs were implemented. According to James Johnson, formerly the senior economist for Amoco, "[i]t should be remembered that the initial allocation of trading credits represents a reduced level of emissions. Thus, in a very real sense, the allocation already represents a taking from the emission source."(137) Broadening the perspective reveals a different baseline, however. Private property owners have never had the right to create a nuisance,(138) and the government traditionally has had the power to regulate a nuisance like pollution.(139) Thus, when government regulates air pollution through the mechanism of tradable emissions permits, it is not effecting a "taking" any more than if it were to regulate through command and control mechanisms.

Several other cases also illustrate the presumption against vesting. In Reichelderfer v. Quinn,(140) for example, the Court presumed that Congress did not intend to vest rights even though the language of the statute suggested otherwise. There, residents living near a park brought a takings action when Congress directed that a fire engine house be built within the park.(141) The residents argued that because the Act creating the park recited that the lands taken for the park would be "perpetually dedicated and set apart as a public park or pleasure ground for the people of the United States,"(142) the residents had a vested right in the park lands.(143) The Court held, however, that the residents did not have a vested property interest in the park lands because the statute was to be strictly construed: "Statutes said to restrict the power of government by the creation of private rights are, like other public grants, to be strictly construed for the protection of the public interest."(144) Thus, the establishment of the fire house on the park lands did not constitute a taking.(145)

The tradable emissions situation differs somewhat from the situation in Reichelderfer because under a tradable emissions scheme, contracts are made between the government and claimant. Under Bowen v. Public Agencies Opposed to Social Security Entrapment,(146) however, this difference probably will not result in a different outcome. Public Agencies dealt with the Social Security Act(147) and contracts made pursuant to it. When Congress passed the Social Security Act of 1935, it expressly reserved the right to alter, amend, or repeal any provision of the Act.(148) In 1950 Congress enacted section 418, which authorized voluntary participation by States in the Social Security System.(149) The federal government entered into "Section 418 Agreements" with states. These agreements contained termination provisions that were subsequently repealed by Congress.(150) Reversing the district court, the Supreme Court held that "contracts should be construed, if possible, to avoid foreclosing exercise of sovereign authority."(151) Because the agreements were made pursuant to section 418, the Court concluded that the agreements incorporated Congress's reserved power of amendment(152) and, thus, there was no taking when Congress abolished the termination provisions of the agreements.(153)

Another example of the presumption against the vesting of rights is United States ex ref. Tennessee Valley Authority v. Powelson.(154) There, the government brought a condemnation proceeding on behalf of the Tennessee Valley Authority against Powelson, assignee of the property interest and property rights arising out of condemnation proceedings against a power company.(155) The power company had been authored by the North Carolina legislature to take riparian lands and water rights by eminent domain.(156) The power company based its valuation of the condemned property on the theory that the condemned property could have been used in conjunction with other tracts of land to construct an elaborate four-dam hydroelectric project.(157) The Court concluded that "[t]he grant of power of eminent domain is a mere revocable privilege for which a state cannot be required to make compensation. A revocation of that privilege is but a recall of a part of its sovereign power for which no price may be exacted."(158) Because the state of North Carolina would not have to pay for the grant of the power of eminent domain, the Court reasoned, the United States should not have to either.(159)

In Powelson, the initial grant of eminent domain power did not state that the grant was revocable. The Court implied, however, that because eminent domain is a power exercised purely for the benefit of the public, the power of eminent domain is public property, rather than private, even when the power of eminent domain has been granted to a private party:

Equity and fair dealing do not require the payment by the United States to the

landowner of the amount of a valuation of his lands based on the existence

of his privilege to use the power of eminent domain. It is "private property"

which the Fifth Amendment declares shall not be taken for public use without

just compensation. The power of eminent domain can hardly be said to fall in

that category. It is not a personal privilege; it is a special authority

impressed with a public character and to be utilized for

a public end. An award based on the value of that privilege would be an

appropriation of public authority to a wholly private end. The denial of such

an award to the landowner does no injustice.(160)

Thus, because the power of eminent domain is exercised purely for the benefit of the public, that power is public property even though it may have been granted to a private party.

A similar argument could be made with respect to tradable emissions permits. The air is a public good and remains a public good whether the use of that public good is regulated by a command-and-control system or a tradable emissions program. Tradable emissions programs attempt to mimic a market in order to achieve efficiency gains in pollution reduction, but the programs do not actually transform a traditional public good into private property.

The previous cases illustrate the strong presumption against vesting that the Supreme Court applies in analyzing property interests arising from an act of government. Were the Court to analyze whether a tradable emissions program created vested property rights, the Court would closely examine the enabling legislation or regulation. If the statute or regulation explicitly reserved the government's power to reclaim the interest, the case is the easiest for the government to avoid takings claims. If the statute or regulation did not speak to the issue of whether the interest vested, the Court would most likely apply the presumption against vesting, as it did in Bowen. Even if the statute or regulation professed to create a permanent right, the Court may still apply the presumption against vesting, as in Reichelderfer. Before regulators breathe a sigh of relief that tradable emissions permits will be presumed not to have vested, however, a look at some of the deviations away from the presumption against vesting should be considered.

4. Limits on the Presumption Against the Vesting of Rights

a. The "Positivist Problem"

The Court refused to apply the presumption against vesting in Alamo Land & Cattle Co. v. Arizona.(161) In that case, the New Mexico-Arizona Enabling Act(162) provided that certain lands of the state be held in trust.(163) Subsequently, Arizona (as lessor) and Alamo Land and Cattle Company (as lessee) executed a grazing lease for a period of ten years,(164) but before the ten years expired, the federal government condemned the land to build a flood control dam and reservoir.(165) Both Alamo Land and the State of Arizona claimed an interest in the award.(166)

The Court acknowledged that, ordinarily, a leasehold interest has compensable value.(167) It qualified this, however, by noting that many factors eliminate compensable value in a leasehold interest.(168) For example, a lessee would receive no compensation if "any lease of trust land was revocable at will by the State, or if it provided that, upon sale or condemnation of the land, no compensation was payable to the lessee."(169) The Court noted that while it was within Arizona's power to insert a condemnation clause in a lease for trust land, the state could not claim the same result when its lease contained no such clause.(170) Thus, the Court refused to apply the presumption against vesting.

In Alamo Land, the Court probably did not apply the presumption against vesting because it was dealing with a leasehold interest that usually enjoys Fifth Amendment protection.(171) The Court was disturbed by the state's argument, which would allow the government to define the nature of the lease after it had been executed.(172) Professor Jeremy Paul refers to this as the "problem of positivism," which he explained as follows:

If the law gives government absolute power to define property rights, what

prevents the state from telling the so-called owner of this land that the

right to use or sell the land is not "property," and that the owner therefore

has no right to compensation when the government claims the land . . . ?(173)

Alamo Land can be read as an opinion in which the Court did not disregard the presumption against vesting. Rather, in light of the positivist problem, it simply determined that the presumption that a leasehold is compensable is stronger.

b. State Discrimination Against Federal Policy

Just as the government may not redefine rights to its advantage, as it attempted to do in Alamo Land, states may not redefine property so as to burden federal constitutional rights. In Reconstruction Finance Corp. v. Beaver County,(174) the Reconstruction Finance Corporation Act(175) prohibited states and local governments from imposing taxes on the personal property of the Reconstruction Finance Corporation but allowed real property to be taxed to the same extent according to its value as other real property is taxed.(176) The Pennsylvania Supreme Court held that machinery is part of the freehold under Pennsylvania law and is therefore taxable.(177) The U.S. Supreme Court affirmed, holding that

congressional purpose can best be accomplished by application of settled

state rules as to what constitutes `real property' so long as it is plain, as

it is here, that the state rules do not effect a discrimination against the

Government, or patently run counter to the terms of the Act.(178)

In other words, while states are free to create property interests or refrain from creating property interests, they apparently may not define tradable emissions permits in such a way as to burden federal constitutional rights.

Unlike Reconstruction Finance, in which the Pennsylvania law was established long before the federal tax law was passed, and was therefore "settled," states are defining tradable emissions permits in such a way that the permits have many of the characteristics of property, yet will not be property for the purposes of takings law.(179) Arguably, this burdens the federal constitutional right to protection against a taking of property. While in theory such an argument is plausible, it seems quite unlikely that a court would find this argument more persuasive than the presumption against vesting.

5. Reliance/Reasonable Investment-Backed Expectations

A party's reliance on a government benefit can influence the outcome of a takings case. Reliance is an important factor in both the analysis of whether a property interest has vested and whether a taking has occurred. This section examines the impact of reliance, first as it relates to the question of the vesting of rights, and second as it relates to the question of whether there is a taking.

a. Reliance and the Vesting of Rights

As noted above, the Kaiser Aetna decision rested on a finding of an "actual physical invasion."(180) The Court also seemed swayed, however, by the fact that Kaiser Aetna had invested heavily in making the improvements to a private pond that was then subjected to a navigational servitude.(181) Although the Court did not rely on the doctrine of estoppel, it is clear that the Court was influenced by Kaiser Aetna's significant improvements to the pond and the government's consent:

We have not the slightest doubt that the Government could have refused to

allow such dredging on the ground that it would have impaired navigation in

the bay, or could have conditioned its approval of the dredging on petitioners'

agreement to comply with various measures that it deemed appropriate for the

promotion of navigation. But what petitioners now have is a body of water that

was private property under Hawaiian law, linked to navigable water by a

channel dredged by them with the consent of the Government. While the consent

of individual officials representing the United States cannot "estop" the

United States . . . [,] it can lead to the fruition of a number of

expectancies embodied in the concept of "property"--expectancies that, if

sufficiently important, the Government must condemn and pay for before it

takes over the management of the landowner's property.(182)

The "expectancies" language in Kaiser Aetna should give regulators some concern as they develop tradable emissions permits. Companies participating in tradable emissions programs make large capital investments in plants that would be worthless if the level of pollution allowable under the emissions trading permits is diminished dramatically.

Kaiser Aetna, however, is distinguishable from the type of case that might arise as a result of governmental changes to a tradable emissions program. First, the Kaiser Aetna Court was impressed that before the improvements, the pond was clearly private property under Hawaiian law.(183) By contrast, companies do not "own" the air. Second, Kaiser Aetna's improvements took a nonnavigable pond and made it navigable, thus creating something that was not previously in existence and that the government then claimed. In contrast, when companies make business investments based upon expectations of how many emissions permits will be available for their use, they are not directly creating value that the government then attempts to take. Rather, the government creates the permits, which the companies then exploit.

The Court in Kaiser Aetna did not overrule or even mention Louisville Bridge Co. v. United States,(184) in which the Court had little sympathy for private party investments. There, the Louisville Bridge Company built a bridge across the Ohio River pursuant to the requirements set forth in Acts of Congress that specified minimum width and clearance.(185) During World War I, the Secretary of War gave notice to the company that the width and clearance were insufficient.(186) The company argued to the Court that the "[b]ridge was constructed under an irrevocable franchise, and became upon its completion a lawful structure and the private property of [the company]."(187) Noting the "fundamental rule that requires strict construction of such grants as against the private right"(188) and noting further that the congressional act contained "no words of perpetuity, nor any express covenant against a change in the law,"(189) the Court held that the congressional acts did not confer an irrevocable franchise upon the company.(190) The Court appeared to be unfazed by the economic loss suffered by the company:

It is true that Congress must have contemplated that a large investment of

private capital would be necessary, and that the bridge when once constructed

could not be abandoned or materially changed without a total or partial loss

of value. This is a very grave consideration, and we have not at all

overlooked it; but we cannot deem it controlling of the question presented. It

may be assumed that the parties foresaw, what experience since has

demonstrated, that it would be many years before changing

conditions of navigation would render the bridge out of date, and that the

investors were satisfied with the prospect of the profit to be gained from the

use of the bridge in the meantime.(191)

Louisville Bridge thus strongly supports the government's ability to revoke tradable emissions permits even after substantial investment on the part of the company based on an expectation of a higher level of allowable emissions.

b. Reliance and Whether There Is a Taking

Rather than applying a "set formula" for identifying a taking, the Court relies on "ad hoc, factual inquiries" regarding the circumstances of the case.(192) One of the critical factors to consider is the extent to which the regulation has interfered with reasonable investment-backed expectations.(193) Thus, even if the Court determines that the claimant has a vested property interest, the Court may determine that there has not been a taking. This was the situation in Monsanto, where the Court held that to the extent Monsanto's trade secret data qualified as a property interest under Missouri law, that property is protected by the Takings Clause.(194) Monsanto did not win the case, however, because the Court held that Monsanto did not have a reasonable, investment-backed expectation that the data would not be disclosed.(195)

Monsanto involved three sets of data.(196) With respect to data submitted after the effective date of the 1978 amendments to FIFRA,(197) the Court held that Monsanto could not have had a reasonable, investment backed expectation that EPA would keep the information confidential.(198) Noting that a "`reasonable investment-backed expectation'" must be more than a "`unilateral expectation or an abstract need,'"(199) the Court emphasized that FIFRA, which required the submission of health and safety data in order to receive a government license to produce and sell pesticides,(200) had put Monsanto on notice that "EPA was authorized to use and disclose any data turned over to it by an applicant for registration."(201) EPA's authorization to use and disclose the data was not an unconstitutional condition, the Court said, because regulations on the marketing and use of pesticides are "burdens we must all bear in exchange for `the advantage of living and doing business in a civilized community.'"(202)

With respect to data submitted prior to the 1972 amendments to FIFRA,(203) the Court held that no taking had occurred because the statute was silent regarding the confidentiality of data.(204) In such a regulated industry, the Court said, the possibility was "substantial" that the agency "would find disclosure to be in the public interest."(205) Thus, Monsanto could not have had a reasonable, investment-backed expectation that the data would remain confidential.(206)

By contrast, the Court said that data submitted between the effective dates of these two amendments might have been taken by disclosures,(207) because the statutory scheme in force at that time offered the submitter some protection from disclosure.(208) The Court concluded that "this explicit governmental guarantee . . . formed the basis of a reasonable investment-backed expectation."(209)

The Court's analysis in Monsanto of reasonable, investment-backed expectations suggests that even if tradable emissions permits were considered property within the meaning of the Fifth Amendment, a taking would not be found so long as nothing in the statutory language had guaranteed that the government would not reduce the amount of pollution allowed under the permits.

In sum, the government has, wide latitude to define property rights that it creates. Even if the government is not careful in drafting statutes and regulations that prevent property rights in tradable emissions permits from vesting, courts probably will apply a presumption against vesting and the government will not be liable for a takings claim. Moreover, precedent suggests that a company's reliance on tradable emissions permits will not be considered "reasonable" in light of the government's traditional authority to regulate pollution. Because these issues have not been tested in the context of tradable emissions permits, however, legislators and regulators should be careful to clarify that tradable emissions permits are government benefits that the government may reclaim at will.

IV. THE SECOND CLASS OF TAKINGS CASES: DIMINUTION IN VALUE OF THE REAL ESTATE

A claim that a tradable emissions permit has been taken may not end with a judicial determination of whether vested property has been taken because companies may have a claim within the second class of takings cases. Plaintiffs could claim that regulation of property deprives them of the economic use of their property or that regulation has "unfairly singled out the property owner to bear a burden that should be borne by the public as a whole."(210) Like the case law that governs the first class of takings cases, the case law governing the second class of takings cases is uncertain and changing.

This Part begins with a discussion of conceptual severance. Whereas the previous Part considered tradable emissions permits as severable from the estate, this Part considers how the outcome to a takings claim may differ if the permits are not considered severable from the land. This Part then attempts to predict how courts might react to this second class of takings claims.

A. The Problem of Conceptual Severance

Like most forms of regulation that affect property, regulation of tradable emissions permits may be viewed in two distinct ways. The first approach is to view the air as an estate separate from the real estate. This approach, referred to as "conceptual severance,"(211) views each "strand" in the bundle of rights as a separate property right. Tradable emissions programs lend themselves to this way of thinking, because they explicitly divide up the air. The alternative approach is to consider the property as a whole.(212)

But as Professor Joseph Singer points out, the distinction between these two approaches may be illusory: "Changes in legal rules that retroactively destroy or reallocate particular strands in the bundle of property rights may be viewed as 'takings' of property that must be compensated. The problem, however, is that every regulation may be viewed as taking particular strands in the bundle of property rights."(213)

Two cases, both decided in 1987, illustrate the difficulty in discerning what counts as a separate property interest. In Keystone Bituminous Coal Ass'n v. DeBenedictis,(214) the Court upheld Pennsylvania's Subsidence Act,(215) which required that a certain amount of coal be left in the earth to provide support for mines.(216) The Court refused to define the portion of the coal that was required to be left in place(217) or the support estate(218) as separate property interests. Viewing the coal company's entire holdings as the baseline by which to determine whether the company had been denied the economically viable use of its property,(219) the Court found no taking in violation of the Fifth Amendment.(220)

The Court reached a different result in Hodel v. Irving.(221) In the latter part of the nineteenth century, Congress divided the communal lands of Indian tribes into individual allotments.(222) The outcome was "disastrous."(223) Because the land was held in trust and often could not be alienated, it became "fractionated."(224) Finally realizing its mistake, Congress enacted the Indian Land Consolidation Act,(225) which had an escheat provision by which highly fractionated land would escheat to the tribe.(226) The Court held that "the right to pass on valuable property to one's heirs is itself a valuable right,"(227) and, therefore, the escheat provision constituted a taking.(228)

Whether the Court severs the permits from the rest of the estate could impact the outcome of a tradable emissions permit takings case. Oddly enough, while in Keystone and Hodel conceptual severance aided or would have aided the claimant's takings case, in a tradable emissions takings case conceptual severance could aid the government's defense. As the previous Part demonstrated, there is a strong presumption against the vesting of benefits.(229) Therefore, if tradable emissions permits are viewed as separate from the parcel of land--as if they were more akin to AFDC benefits or a franchise--then the government has a high likelihood of defeating a takings claim. If, however, they are viewed as land use regulation, the government could be vulnerable to a takings claim based upon a diminution in value of the land.

B. When a Regulation Goes "Too Far" in Depriving an Owner of Economic Use

A regulation will be considered to have gone "too far"(230) if that regulation denies the owner of all economically beneficial or productive use of land.(231) Lucas v. South Carolina Coastal Council(232) is a landmark case that has generated an abundance of commentary.(233) Lucas brought suit claiming an unconstitutional taking following the passage of a South Carolina statute that prevented him from building on his beachfront lots.(234) After accepting the state trial court's finding that the prohibition rendered Lucas's land "valueless"(235) and finding that the prohibition did not fit within the nuisance exception to takings law, the Supreme Court held that the prohibition constituted a taking.(236)

Professor Joseph Sax has suggested four reasons why Lucas does not render the government vulnerable to a takings claim based on a shutdown resulting from a company's inability to obtain enough tradable emissions permits at a reasonable price.(237) First, the Lucas opinion emphasized Lucas's pre-existing property right in his land; by contrast, tradable emissions permits are designed not to vest as property interests.(238) Second, pollution is a classic nuisance and therefore the right to pollute is never part of the title to land.(239) Third, the opinion seems directed at regulations that require that land be left in an undeveloped state.(240) Fourth, Lucas involved a total taking, which is unlikely to occur even following a factory shutdown.(241)

The Court has continued to reshape takings law since Lucas. In 1994, the Court decided Dolan v. City of Tigard,(242) another case involving restrictions on a building permit. The City of Tigard conditioned approval of the Dolans' building permit application on the dedication of part of her property to flood control and traffic improvements.(243) The Court applied the Nollan v. California Coastal Commission(244) "nexus test," which requires that an "essential nexus" exist between the legitimate state interest that the conditions advance and the permit conditions imposed.(245) It then took the "nexus test" a step further and applied a "rough proportionality" test that requires the permit condition to be related both in nature and extent to the state interest that the condition advances.(246) Although Dolan was a linkage case, carrying the concept of rough proportionality over to the general takings context could render the government vulnerable to a takings claim. For example, if a requirement of rough proportionality were required for the nuisance exception to apply, a court could potentially refuse to consider a shutdown resulting from the inability to obtain enough tradable emissions permits as outside the scope of the state's power to abate nuisances. Thus far, however, the "rough proportionality" requirement has not been extended in such a way. In addition, a court probably would not curtail the state's traditional power to abate pollution merely because the regulatory control mechanism shifts from a command-and-control approach, which very rarely requires a shutdown, to a tradable emissions approach, which occasionally may.

V. CONCLUSIONS AND RECOMMENDATIONS

Tradable emissions programs are recent developments in the regulatory landscape. As a result, courts have never faced the issue of whether a change in the level of pollution allowable under the tradable emissions permits may comprise a taking. An examination of the cases dealing with physical L invasions and takings of title reveals that the government has wide latitude to define property rights. Even if the government is not careful in drafting statutes and regulations to prevent property rights in tradable emissions permits from vesting, courts will probably apply a presumption against vesting and the government will not be liable for a takings claim. Moreover, precedent suggests that a company's reliance on tradable emissions permits will not be considered "reasonable" in light of the government's traditional authority to regulate pollution. The potential for successful takings claims based on diminution in land value is greater because the law is in flux. Under current law, however, a takings claim probably would not be successful even if the government repossessed the permits or if the permits became so expensive that some companies had to shut down.

Nevertheless, legislators and regulators should be careful in their design and implementation of tradable emissions programs because these issues have not been tested in this context. Legislators and regulators should be explicit in statutes, regulations, and contracts that these marketbased programs, while mimicking the market in order to reap the benefits of economic efficiency, do not confer vested property interests upon those who obtain permits. Statutes, regulations, and contracts should make clear that tradable emissions permits are government benefits that the government may reclaim at will. Furthermore, the government should create tradable emissions permits that are clearly severable from the real estate upon which a factory sits. One way to do this may be to create a trading program that allows trades between stationary and mobile sources.

Should a takings suit commence, courts should adhere to the long line of precedent that respects the sovereign's power to control the vesting of property interests. Courts adjudicating takings claims in this context should be aware that requiring the government to compensate permit holders for changes in permit allowances or values would represent a radical shift away from the government's traditional power to regulate nuisances like pollution without having to pay "just compensation" to polluters. If the court breaks from this tradition, a creative regulatory approach intended to increase air quality will have the effect of granting a permanent entitlement to pollute.

(1) U.S. Const. amend. V. (This provision applies against the states through the Due Process Clause of the Fourteenth Amendment. U.S. Const. amend. XIV, [sections] 1); see also Texaco, Inc. v. Short, 454 U.S. 516, 523 (1982)

(explaining that the Fifth Amendment's Takings Clause applies to state governments through the Fourteenth Amendment); Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 160 (1980) (same); Penn Cent. Transp. Co. v. New York, 438 U.S. 104, 122 (1978) (same); Chicago, B. & Q. R. Co. V. City of Chicago, 166 U.S. 226, 239 (1897) (same).

(2) Yee v. City of Escondido, 503 U.S. 519, 522 (1992); Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982).

(3) Yee, 503 U.S. at 522 (citing Loretto, 458 U.S. at 426 (1982)).

(4) Loretto, 458 U.S. at 427-32; see also Pumpelly v. Green Bay Co., 80 U.S. 166, 181 (1872) (stating that "where real estate is actually invaded . . . it is a taking"). For an historical discussion of physical appropriation cases, see generally Frank I. Michelman, Property, Utility, and Fairness: Comments on the Ethical Foundations of "Just Compensation"Law, 80 Harv. L. Rev. 1165, 1184 (1967) (at one time, courts held that compensable takings required physical occupation). (5) Loretto, 458 U.S. at 523 (citing Penn Cent. Transp. Co. v. New York, 438 U.S. 104, 12325 (1978)); see infra parts IV.A-B.

(6) Commentators also have been struggling to formulate a unified theory of takings jurisprudence. See, e.g., Andrea L. Peterson, The Takings Clause: In Search of Underlying Principles Part II--Takings as Intentional Deprivation of Property Without Moral Justification, 78 Cal. L. Rev. 53 (1990) (arguing that the Supreme Court finds a compensable taking when the government intentionally forces a property owner to give up property, unless lawmakers are seeking to prevent or punish the property owner for action or inaction that the lawmakers reasonably believe the public would consider wrongful); Andrea L. Peterson, The Takings Clause: In Search of Underlying Principles Part I--A Critique of Current Takings Clause Doctrine, 77 Cal. L. Rev. 1301

(1989) (arguing that although the Supreme Court's takings jurisprudence has been chaotic, patterns in the Court's decisions can be used to develop principles that would account for the results in a majority of takings cases); Joseph L. Sax, Takings, Private Property and Public Rights, 81 Yale L.J. 149 (1971) (arguing that traditional regulatory takings jurisprudence, by focusing only on the property regulated and not other property affected by regulated use of the property, does not recognize the interconnectedness of property; takings jurisprudence should instead provide for the vindication of public rights without compensating the regulated property owner); Richard A. Epstein, Takings Private Property and the Power of Eminent Domain (1985)

(arguing that the Takings Clause and parallel clauses of the Constitution, when properly understood as extensions of private law, render many recent social legal reforms, such as zoning, rent control, and progressive taxation, unconstitutional). (7) Penn Cent., 438 U.S. at 124.

(8) See Lynda J. Oswald, Cornering the Quark: Investment-Backed Expectations and Economically Viable Uses in Takings Analysis, 70 Wash. L. Rev. 91 (1996)

(arguing that the investment-backed expectations test and the economically viable use test are two prominent but unnecessarily confusing factors in the ad hoc, factual inquiry into whether a regulatory taking has taken place).

(9) For further discussion of other methods of air pollution regulation, see David R. Fiore, Intermodal Transportation Planning for the Environment: Social, Cultural, and Economic Considerations for an Interdisciplinary Solution for Change, 23 Transp. L.J. 237 (1995); John H. Ridge, Deconstructing the Clean Air Act: Examining the Controversy Surrounding Massachusetts' Adoption of the California Low Emission Vehicle Program, 22 B.C. Envtl. Aff. L. Rev. 163 (1994); Ora Fred Harris, Jr., The Automobile Emissions Control Inspection and Maintenance Program: Making it More Palatable to "Coerced" Participants, 49 La. L. Rev. 1315 (1989).

(10) See infra notes 20-46 and accompanying text.

(11) See infra notes 30-42 and accompanying text (discussing the acid deposition control provisions and the multi-pollutant emissions program

(RECLAIM)). (12) See infra notes 43-46 and accompanying text (discussing EPA's work to develop a market approach to air pollution control).

(13) Courts have not addressed this issue directly. Academicians have raised but not addressed this issue. See, e.g., Peter S. Menell & Richard B. Stewart, Environmental Law and Policy 387 (1994) (questioning whether a unilateral governmental reduction of the amount of pollution permitted under existing permits would create a takings claim).

This Comment focuses solely on whether tradable emissions programs increase government vulnerability to takings claims. It does not examine the possibility of potential due process claims. See, e.g., Charles A. Reich, The New Property, 73 Yale L.J. 733 (1964); Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (1985); Mathews v. Eldridge, 424 U.S. 319 (1976); Board of Regents v. Roth, 408 U.S. 564 (1972); Goldberg v. Kelly, 397 U.S. 254 (1970).

Arguments based on state constitutional provisions or federal or state statutory provisions also are not discussed. With the changing political landscape, statutory takings provisions could become increasingly important. See, e.g., Newt Gingrich et al., Contract With America 134 (1994) ("The Job Creation and Wage Enhancement Act allows private property owners to receive compensation (up to 10 percent of fair market value) from the federal government for any reduction in the value of their property."). Interestingly, the term "property" in the Job Creation and Wage Enhancement Act includes not only land, but also the right to use or receive water. H.R. 9, 104th Cong., 1st Sess. [sections] 9004(6) (1995). (14) 42 15.S.C. [subsections] 7401-7671q (1988 & Supp. V 1993). (15) Id. [subsections] 7651-7651o. (16) The CAA sets National Ambient Air Quality Standards (NAAQS) for various pollutants. Id. [sections] 7409. Each state must establish State Implementation Plans (SIPs) to ensure that NAAQS are met. Id. [sections] 7410.

(17) For general discussions of air quality regulation comparing the traditional command-and-control policy framework with market-based approaches, see A. Myrick Freeman III, Economics, Incentives, and Environmental Regulation, in Environmental Policy in The 1990s, at 189, 195-204 (Norman J. Vig & Michael E. Kraft eds., 2d ed. 1994); Tom Tietenberg, Environmental and Natural Resources Economics 392-419 (3d ed. 1992); Project '88--Round II: Incentives for Action: Designing Market-Based Environmental Strategies 4-9 (Offices of Senators Timothy E. Wirth & John Heinz eds., 1991); Porject 88: Harnessing Market Forces to Protect our Environment: Initiatives for the New President 24-31 (Offices of Senators Timothy E Wirth & John Heinz eds., 1988) [hereinafter Harnessing Market Forces].

(18) Harnessing Market Forces, supra note 17, at 25.

(19) Id. Emission standards may exceed current technology, thus forcing technology to develop. This approach has encouraged "the development of flue gas desulfunzation for power plants, sulfuric acid technology for smelters, and catalysts for automobiles." Id. (20) Id. at 26-27 Under a tradable emissions program, polluters would be required to have permits specifying an acceptable amount of discharge Polluters who reduced discharges below the permit level could sell the surplus to another polluter As a result, polluters who found it too costly to comply with their allowance under their existing permits could choose to buy additional permits. Id.

(21) Vivien Foster & Robert Hahn, ET in LA: Looking Back to the Future 4 (1994).

(22) Id.

(23) Id. at 5.

(24) Id. For a description of the evolution of EPA's air pollution "bubble" policy, see Kent E. Portney, Controversial Issues in Environmental Policy: Science vs. Economics vs. Politics 90-92 (1992); see also Richard A. Liroff, Reforming Air Pollution Regulation: The Toil and Trouble of EPA's Bubble 35-60 (1986). (25) Foster & Hahn, supra note 21, at 5.

(26) Id.

(27) Id. at 4.

(28) 42 U.S.C. [subsections] 7651b-7651e (Supp. V 1993).

(29) South Coast Air Quality Mgmt. Dist., 1993 Annual Report 7 [hereinafter SCAQMD 1993 Annual Report]. The multi-pollutant emissions program (RECLAIM) "covers 390 major Southland facilities that emit more than four tons a year of either nitrogen oxides or sulfur oxides." Id. This program allows buyers and sellers to access a computenzed bulletin board that lists the availability of credits for trading. Id. (30) 42 U.S.C. [subsections] 7651-76510 (Supp. V 1993). (31) Id. [sections] 7651.

(32) Id.

(33) Id. [sections] 7651b.

(34) Id. [sections] 76510.

(35) Id. [sections] 7651b.

(36) Id. [sections] 7651b(f).

(37) Clean Air Act Amendments of 1989: Hearings Before the Subcomm. on Environmental Protection of the Comm. on Environment and Public Works, 101st Cong., 1st Sess. 9 (1989). Senators Timothy E. Wirth (D-Colo.) and Henry J. Heinz (R-Pa.) stated that the government's reduction of allowances would not constitute a taking. Id. (38) SCAQMD 1993 Annual Report, supra note 29, at 7.

(39) SCAQMD Rule 2007(b)(1) (1993).

(40) Id.

(41) Id. Rule 2007(b)(2)-(3).

(42) Id. Rule 2007(b)(4). Other state agencies have not been so careful to preserve the right of the government to diminish the level of pollution a,lowable under the permits. For example, the relevant Texas regulations are as follows:

(j) Depreciabon. The Executive Director is prohibited from depreciating any ERC 

[Emissions Reduction Credit] or MERC [Mobile Source Emissions Reduction Credit],

except under the following circumstances:

(3) regulatory changes were promulgated after the ERC or MERC certificate

has been issued, which would have required reductions from the source that

created the qualifying reduction. The credit shall be reduced by the amount affected

by the regulatory change. Tex. Admin. Code tit. 30 [sections] 101.29 (1994). The Texas regulations, un,ike the federal acid deposition control provisions and the SCAQMD rules, do not carefully reserve the right of the government to depreciate the level of pollution allouable under the permits. (43) Letter from Mary D. Nichols, Assistant Administrator for Air and Radiation, U.S. Environmental Protechon Agency, to Dennis R. Lunderville, Director, New Hampshire Air Resources Division 1 (Jan. 23, 1995) (on file with author) (encouraging states to work with EPA to implement emissions trading approaches to achieve air quality goals). For example, EPA has been working with the Northeast States for Coordinated Air Use Management (NESCAUM) and the Mid-Atlantic Regional Air Management Association (MARAMA) to develop a market approach to air pollution control. Id. at 2. For a description of the NESCAUM program, see Michael C. Naughton, Establishing Interstate Markets for Emissions Trading of Ozone recursors: The Case of the Northeast Ozone Transport Commission and the Northeast States for Coordinated Air Use Management Emissions Trading Proposals, 3 N.Y.U. Envtl. L.J. 195, 198 (1994).

(44) 60 Fed. Reg. 39,668 (Aug. 3, 1995) (preamble proposed); 60 Fed. Reg. 44,290 (Aug. 25, 1995) (rule proposed).

(45) 42 U.S.C. [subsections] 7651b(f) (Supp. V 1993).

(46) 60 Fed. Reg. at 39,668.

(47) 444 U.S. 164 (1979)

(48) Id. at 165

(49) Id. at 167.

(50) Id. at 179.

(51) Id. at 166.

(52) Id. at 164.

(53) Id. at 179-80.

(54) 447 U.S. 74 (1980).

(55) Id. at 78.

(56) Id. at 83-84

(57) Id. at 84.

(58) 458 U S. 419 (1982).

(59) Id . at 441

(60) Id.

(61) 483 U.S. 825 (1987).

(62) Id. at 832.

(63) Id. Justice Scalia noted that Nollan is not inconsistent with Pruneyard. Id. He distinguished Nollan from Firaneyard because, in Pruneyard, the owner had already opened his land to the public. In addition, Scalia noted that Nollan was not inconsistent with Kaiser Aetna. Id. He distinguished Kaiser Aetna as being "affected by traditional doctrines regarding navigational servitudes." Id. (64) 503 U.S. 519 (1992).

(65) Id. at 526-33.

(66) The Supreme Court in Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), structured its analysis around these two questions. Id. at 1001-14. In Monsanto, the Court held that Monsanto's trade secret data was a cognizable property nght under Missouri law, but that the government's disclosure of the trade secret data did not constitute a taking. Id. (67) See infra part III.B.5 (discussing the importance of reliance in the analysis of a taking).

(68) 292 U.S. 571 (1934).

(69) Id. at 579-80.

(70) Id. at 574.

(71) Id. at 578-79.

(72) Id. at 577

(73) Id. at 576.

(74) Id.

(75) 323 U.S. 373 (1945).

(76) Id. at 374 75.

(77) Id. at 377-78 (citation omitted).

(78) Id. at 375.

(79) See infra notes 87-88 and accompanying text.

(80) 148 U.S. 312 (1893)

(81) Id. at 313-24.

(82) Id. at 345

(83) Id. at 344-45 ("[S]uch franchise was as much a vested right of property as the ownership of the tangible property.").

(84) Id. at 343 ("[T]his franchise goes with the property; and the navigahon company, which owned it, is deprived of it.").

(85) See Pruneyard Shopping Ctr. v. Robbins, 447 U.S. 74, 83 (1980) (noting that Monongahela has been characterized as reshng primarily on the doctrine of estoppel); see also United States v. Rands, 389 U.S. 121, 126 (1967)

(same); Omnia Commercial Co. v. United States, 261 U.S. 502, 513-14 (1923)

(noting that Monongahela rested primarily on the doctrine of estoppel); Greenleaf-Johnson Lumber Co. v. Garrison, 237 U.S. 251, 264-66 (1915) (same); Lewis Blue Point Oyster Cultivahon Co. v. Briggs, 229 U.S. 82, 89 (1913)

(same). (86) General Motors, 323 U.S. at 383-84. (87) 505 U.S. 1003 (1992).

(88) Id. at 1027-28.

(89) 444 U.S. 51 (1979).

(90) Id. at 67-68. The Andrus Court observed that "regulations that bar trade in certain goods have been upheld against claims of unconstitutional taking." Id. at 67. The Court noted that it had sustained regulahons prohibidng the sale of alcoholic beverages despite the fact that previously acquired stocks were rendered illegal. Id. (cidng Everard's Breweries v. Day, 265 U.S. 545

(1924)). (91) United States v. Causby, 328 U.S. 256, 266 (1946) (quoting United States ex ref. Tennessee Valley Auth. v. Powelson, 319 U.S. 266, 279

(1943)). (92) See generally Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1020-32 (1992) (stating that takings jurisprudence has "tradihonally been guided by the understandings of . . . citizens regarding the content of, and the State's power over, the 'bundle of rights' that they acquire when they obtain htle to property," id. at 1027). (93) 467 U.S. 986 (1984).

(94) Id. at 1001-04. The Monsanto Court clearly separated the discussion of what conshtutes property from what conshtutes a taking. The issue of what conshtutes property is discussed in this sechon, while the issue of what conshtutes a taking is discussed in Part III.B.5.

(95) 7 U.S.C. [subsections] 136-136y (1994).

(96) Monsanto, 467 U.S. at 998-99. 97

(97) Id. at 1003-04.

(98) Id. at 1001 (quoting Board of Regents v. Roth, 408 U.S. 664, 677 (1972)).

(99) Id. at 1012.

(100) Id. at 1012 (quoting Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 164 (1980)).

(101) Id. at 1003-04

(102) Id. at 1002-03.

(103) 64 U.S. 40, 44, 46 (1960).

(104) 295 U.S. 555, 596-602 (1935).

(105) 292 U.S. 571, 579

(1934).

(106) 23 U.S. 373, 377-78 (1945).

(107) Ruckelshaus v. Monsanto, 467 U.S. 986, 1003 (1984). In each of these cases, the Court found intangibles to be protected property. For further discussion of Lynch v. United States, 292 U.S. 571 (1934), and United States v. General Motors Corp., 323 U.S. 373 (1945), see supra part III.B.1

(examining the kinds of property interests other than real property that are protected by the takings clause). (108) Id. at 1002.

(109) Id.

(110) Id. at 1003.

(111) 9 U.S. 488 (1973).

(112) 43 U.S.C. [subsections] 315-3160 (1988 & Supp. V 1993).

(113) Fuller, 409 U.S. at 489 (citing 43 U.S.C. [sections] 315(b)).

(114) Id.

(115) Id. at 494.

(116) Id. at 492.

(117) Id.

(118) Id.

(119) Id. at 493.

(120) See Bowen v. Gilliard, 483 U.S. 587 (1987); Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986); United States ex rel. Tennessee Valley Auth. v. Powelson, 319 U.S. 266, cert. denied, 321 U.S. 773 (1943); Reichelderfer v. Quinn, 287 U.S. 315 (1932).

(121) 483 U.S. 587 (1987).

(122) 42 U.S.C. [subsections] 601-617 (1994).

(123) Bowen, 483 U.S. at 589-97.

(124) 42 U.S.C. [sections] 602(a)(26)(A) (1994)

(125) Bowen, 483 U.S. at 590, 592-93

(126) Deficit Reduction Act of 1984, Pub. L. No. 98-369, [sections] 2640(a), 98 Stat. 494, 1145 (codified as amended at 42 U.S.C. [sections] 602(a)(38) 1994)). (127) Bowen, 483 U.S. at 594.

(128) Gilliard v. Kirk, 633 F. Supp. 1529, 1555 (W.D.N.C. 1986), rev'd, 483 U.S. 587, 604 (1987). The district court also held that the AFDC amendments violated the Due Process Clause. Id. The Supreme Court found no such violation. Bowen, 483 U.S. at 603. (129) Bowen, 483 U.S. at 604.

(130) Id. at 608.

(131) Id. at 609-34 (Brennan, J., dissenting) (stating that this is a case where "government intrusion into private life is so direct and substantial that we must deem it intolerable if we are to be true to our belief that there is a boundary between the public citizen and the private person," id. at 610). In a separate opinion, Justice Blackmun expressed "general agreement" with Justice Brennan's dissent. Id. at 634 (Blackmun, J., dissenting). (132) Id. at 612 (Brennan, J., dissenting) (stating further that the relationship between parent and child is a fundamental element of family life). (133) Id. at 624-32 (Brennan, J., dissenting) (stating that the children were presenting claims "based on the constitutionally protected interest in family life," id. at 625). (134) In Bowen, the claimants arguably did not rely on the government benefits. Specifically, the Court noted that although a family's entire net income may be reduced by denying child support payments, in reality most AFDC parents use the support money as part of a general family fund anyway. Id. at 607. As a result, the Court stated that "[w]hatever the diminution in value of the child's right to have support funds used for his or her 'exclusive' benefit may be, it is not so substantial as to constitute a taking under our precedents." Id. By contrast, claimants in a tradable emissions takings suit may have invested heavily. For example, a company may invest in improvements to a private pond that is then subjected to a navigational servitude. See Kaiser Aetna v. United States, 444 U.S. 164, 165 (1979). For further discussion of the impact the Bowen analysis may have on the outcome of a takings claim, see infra notes 146-53 and accompanying text. (135) See supra notes 91-98 and accompanying text (noting that in Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), the Court looked to prior characteristics and historical treatment of trade secrets to determine if they were tangible property). (136) Bowen, 483 U.S. at 600 n.14. The dissent in Bowen recognized the validity of the "willing recipient" theory, but found that the "paradigm of the willing AFDC participant is inapplicable in this case, for the child's fundamental rights are infringed so that other members of the household can receive the assistance that they desire." Id. at 626 (Brennan, J., dissenting). (137) James L. Johnson, Pollution Trading in LA LA Land, 3 Regulation 44 (1994). (138) Recall the common law maxim, sic utere tuo ut alienum non laedas ("one should use his own property in such a manner as not to injure that of another"). Black's Law Dictionary 1380 (6th ed. 1991)); see also Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1031-32, (1992) (government may defeat a takings claim by identifying "background principles of nuisance and proper y law that prohibit the uses [the property owner] intends"). (139) See, e.g., Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 488 (1987) (Commonwealth can exercise police power to abate public nuisance); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 (1922) (stating that, "[a]s long recognized, some values are enjoyed under an implied limitation and must yield to the police power," but declining to find a proper exercise of police power in this case).

(140) 287 U.S. 315 (1932).

(141) Id. at 316-17.

(142) Id. at 317 (quoting Act of Sept. 27, 1890, ch. 1001, [sections] 1

(currently codified at D.C. Code Ann. [sections] 8-140 (1995))).

(143) Id.

(144) Id. at 321.

(145) Id. at 323

(146) 477 U.S. 41 (1986).

(147 42 U.S.C. [subsections] 301-1397f (1994).

(148) 42 U.S.C. [sections] 1304 (1994) ("The right to alter, amend, or repeal any provisions of this chapter is hereby reserved to the Congress."); see also, Public Agencies, 477 U.S. at 51-52. (149) 42 U.S.C. [sections] 418

(1994); see also Public Agencies, 477 U.S. at 45. (150) 42 U.S.C. [sections] 418(g) (1994) (amending 42 U.S.C. [sections] 418(g) (1982)); see also Public Agencies, 477 U.S. at 48.

(151) Public Agencies, 477 U.S. at 52-53. The Court was reluctant to foreclose Congress's authority with respect to [section] 418 Agreements because of previous decisions in which the Court emphasized that "sovereign power, even when unexercised, is an enduring presence that governs all contracts subject to the sovereign's jurisdiction." Id. at 52; see also Merrion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982); Perry v. United States, 294 U.S. 330

(1935); Lynch v. United States, 292 U.S. 571 (1934). Specifically, the Court in Public Agencies noted that its previous admonitions took on "added force" because the government power at issue served "to implement a comprehensive social welfare program affecting millions of individuals throughout our nation." Public Agencies, 477 U.S. at 53. (152) Public Agencies, 477 U.S. at 54. The agreements incorporated Congress's reserved power of amendment because, the Court reasoned, "[t]he State accepted the Agreement under an Act that contained the language of reservation. That language expressly notified the State that Congress retained the power to amend the law under which the Agreement was executed and by amending that law to alter the Agreement itself." Id. (153) Id. at 54-55. As the Court has observed, "Congress' exercise of the preserved power 'has a limit' in that Congress could not rely on that power to 'take away property already acquired under the operation of the charter, or to deprive the corporation of the fruits actually reduced to possession of contracts lawfully made."' Id. at 54 (quoting Sinking Fund Cases, 99 U.S. 700, 720 (1878)). Although the Court was generous to the government in the construction of the contracts in Public Agencies, it would be wise for the government to draft contracts that reserve legislative power to reduce allowances under tradable emissions programs. (154) 319 U.S. 266, mandate conformed to 138 F.2d 343 (4th Cir.), cert. denied, 321 U.S. 773 (1943)

(155) Id. at 268.

(156) Id. at 269.

(157) Id. at 270.

(158) Id. at 276-77 (citations omitted).

(159) Id. at 277.

(160) Id. at 280.

(161) 424 U.S. 295 (1976)

(162) New Mexico-Arizona Enabling Act, ch. 310, [sections] 28, 36 Stat. 557

(1910), as amended by Act of June 5, 1936, ch. 517, 49 Stat. 1477 (1936), and by Act of June 2, 1951, 65 Stat. 51 (1951). (163) Id.; see also Alamo Land, 424 U.S. at 296-97. (164) Alamo Land, 424 U.S. at 298-99.

(165) Id. at 299.

(166) Id. at 299-300.

(167) Id. at 304.

(168) Id.

(169) Id.

(170) Id. at 307

(171) Id. at 311.

(172) Id. at 307 ("The State's argument would serve to convert and downgrade a 10-year lease, fully recognized and permitted by the Act, into a lease terminable at will or into one automatically terminated whenever the State sells the property or it is condemned. The lessee is entitled to better treatment than this if neither the Enabling Act nor the lease contains any such provision."). (173) Jeremy Paul, The Hidden Structure of Takings Law, 64 S. Cal. L. Rev. 1393, 1410-11 (1991).

(174) 328 U.S. 204 (1946).

(175) Reconstruction Finance Corporation Act, ch. 8, [sections] 10, 47 Stat. 5, 9-10 (1932), as amended by Act of June 10, 1941, ch. 190, [sections] 3, 55 Stat. 248, 248, repealed by Reorganization Plan No. 1 of 1957, 71 Stat. 647.

(176) Id.; see also Reconstruction Finance, 328 U.S. at 206.

(177) Appeal of Defense Plant Corporation, 39 A.2d 713, 714 (Pa. 1944)

("Appellant's machinery, being an integrated part of the manufactory, and so, of the freehold, was therefore taxable, as other real property in the township was taxable unless the Congressional immunity did not apply.").

(178) Reconstruction Finance, 328 U.S. at 210 (emphasis added).

(79) See supra part II.

(180) Kaiser Aetna v. United States, 444 U.S. 164, 180 (1979).

(181) Id. at 165-67.

(182) Id. at 179.

(183) See id. at 16-66, 178.

(184) 242 U.S. 409 (1917).

(185) Act of July 14, 1862, ch. 167, 12 Stat. 569; Act of Feb. 17, 1865, ch. 38, 13 Stat. 431; see also Louisville Bridge, 242 U.S. at 414-15.

(186) Louisville Bridge, 242 U.S. at 415.

(187) Id. at 416.

(188) Id. at 420.

(189) Id. at 419.

(190) Id. at 421.

(191) Id. at 420.

(192) Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 224 (1986).

(193) Id. at 224-25; accord Ruekelshaus v. Monsanto Co., 467 U.S. 986, 1005

(1984); Pruneyard Shopping Ctr. v. Robins, 447 U.S. 74, 83 (1980). The other two factors that have "particular significance" in the determination of whether a taking has occurred are 1) the economic impact of the regulation on the claimant and 2) the character of the governmental action. Connolly, 475 U.S. at 224-25; accord Monsanto, 467 U.S. at 1005; Pruneyard Shopping Ctr., 447 U.S. at 83. (194) Monsanto, 467 U.S. at 1003-04.

(195) Id. at 1005-08

(196) Id. at 1005 (including "any health, safety, and environmental data that Monsanto submitted to EPA").

(197) FIFRA amendments, Pub. L. No. 95-396, 92 Stat. 819 (1978).

(198) Monsanto, 467 U.S. at 1005-06.

(199) Id. (quoting Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. at 161 (1980)). 200 Id. at 991-92.

(201) Id. at 1006.

(202) Id. at 1007 (quoting Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 422

(1992)).

(203) Federal Environmental Pesticide Control Act of 1972, [SUBSECTION] 24(b), Pub. L. No. 92-516, 86 Stat. 973, 997 (codified as amended as at 7 U.S.C. [SUBSECTION] 136v(b) (1994).

(204) Id. at 1008-09.

(205) Id.

(206) Id. at 1009

(207) Disclosure will constitute a taking with respect to these data if the following criteria are met:

[T]he data constituted trade secrets under Missouri law; Monsanto had designated the data as trade secrets at the time of its submission; the use or disclosure conflicts with the explicit assurance of confidentiality or exclusive use contained in the statute during that period; and the operation of the arbitration provision does not adequately compensate for the loss in market value of the data that Monsanto suffers because of EPA's use or disclosure of the trade secrets. Id. at 1013-14.

(208) Id. at 1010.

(209) Id. at 1011.

(210) Yee v. City of Escondido, 503 U.S. 519 (1992) (citing Penn Cent. Transp. Co. v. New York City, 438 U.S. 104, 123-25 (1978).

(211) See Margaret Jane Radin, The Liberal Conception of Property: Cross Currents in the Jurisprudence of Takings, 88 Colum. L. Rev. 1667, 1674-78

(1988).

(212) A court has never directly addressed the question of whether tradable emissions permits are severable property interests. Two cases, however, have dealt with the question of airspace. In United States v. Causby, 328 U.S. 256 (1946), the Court held that the frequent and regular low altitude flights of army and navy aircraft over Causby's land constituted a taking. The Court did not address the question of conceptual severance of air space until Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), in which it upheld New York City's Landmarks Preservation Law, which prohibited the owner of Penn Central from constructing above the terminal. The Court held that the airspace above the terminal is not a separate property interest:

"Taking" jurisprudence does not divide a single parcel into discrete segments and attempt to determine whether rights in a particular segment have been entirely abrogated. In deciding whether a particular governmental action has effected a taking, this Court focuses rather both on the character of the action and on the nature and extent of the interference with rights in the parcel as a whole .... Id. at 130-31. Tradable emissions permits, however, are different in nature from airspace, so these cases do not shed much light on whether a court may find a taking.

(213) Joseph W. Singer, Property Law: Rules, Policies, And Practices 1193

(1993).

(214) 480 U.S. 470 (1987)

(215) Bituminous Mine Subsidence and Land Conservation Act, Pa. Stat. Ann., tit. 52, [SECTIONS] 1406.1-1406.21 (Purdon Supp. 1995).

(216) Id. [SUBSECTION] 1406.4 (repealed 1994); see also Keystone Bituminous Coal Ass'n, 480 U.S. at 474-77.

(217) Keystone Bituminous Coal Ass'n, 480 U.S. at 498.

(218) Id. at 500-01. "[T]he support estate has value only insofar as it protects or enhances the value of the estate with which it is associated. Its value is merely a part of the entire bundle of rights possessed by the owner of either the coal or the surface." Id. at 501. (219) Id. at 499. The Court did not consider 27 million tons of coal that the company would have to leave in place as a separate segment of property. Id. at 498. Specifically, the Court noted that there was no reason to treat less than 2% of the company's coal as a separate parcel of property. Id.

(220) Id. at 502.

(221) 481 U.S. 704, 718 (1987).

(222) General Allotment Act of 1887, ch. 119, 24 Stat. 388 (codified as amended at 25 U.S.C. [SUBSECTION] 331 (1994)); see also Hodel, 481 U.S. at 706.

(223) Hodel, 481 U.S. at 707.

(224) Id.

(225) U.S.C. [SECTIONS] 2201-2211 (1994) (allowing for tribal land consolidation). (226) Section 207 of the Indian Land Consolidation Act of 1983 provided: No undivided fractional interest in any tract of trust or restricted land within a tribe's reservation or otherwise subjected to a tribe's jurisdiction shall descendent [sic] by intestacy or devise but shall escheat to that tribe if such interest represents 2 per centum or less of the total acreage in such tract and has earned to its owner less than $100 in the preceding year before it is due to escheat. 25 U.S.C. [SECTIONS] 2201-2211 (1994).

(227) Hodel, 481 U.S. at 715.

(228) Id. at 717-18. Professor Joseph Singer raises the possibility that the original legislation that created the "fractionation" problem was itself an unconstitutional taking, because it lowered the total value of the reservation land. Singer, supra note 213, at 1200-01.

(229) See supra part III.B.3.

(230) Pennsylvania Coal v. Mahon, 260 U.S. 393, 415-16 (1922) ("The general rule . . . is, that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking."). (231) See, e.g., Agins v. City of Tiburon, 447 U.S. 255, 260 (1980) ("The application of a general zoning law to particular property effects a taking if the ordinance does not substantially advance legitimate state interests, or denies an owner economically viable use of his land."); see also Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015-16 (1992) (landuse regulation that denies an owner all economically viable use is unconstitutional). This section focuses on the second prong of the analysis, that of the raglan denying the owner of economically viable use. Part III.B.3 demonstrated that a regulation authorizing permanent physical occupation also goes "too far" and is therefore a taking.

(232) 505 U.S. 1003 (1992).

(233) See, e.g., Hope M. Babcock, Has the U.S. Supreme Court Finally Drained the Swamp of Takings Jurisprudence?: The Impact of Lucas v. South Carolina Coastal Council on Wetlands and Coastal Barrier Beaches, 19 Harv. Envtl. L. Rev. 1, 3 (1995) (after Lucas, background principles of property law still provide a basis for regulation of development); Richard A. Epstein, Lucas v. South Carolina Coastal Council: A Tangled Web of Expectations, 45 Stan. L. Rev. 1369, 1369 (1993) (analyzing the shortcomings of Lucas); William W. Fisher III, The Trouble with Lucas, 45 Stan. L. Rev. 1393 (1993) (same); Richard J. Lazarus, Putting the Correct "Spin" on Lucas, 45 Stan. L. Rev. 1411, 1431 (1993) (arguing that "Lucas likely signals the emergence of a takings analysis that is more receptive to environmental concerns"); Joseph L. Sax, Property Rights and the Economy of Nature: Understanding Lucas v. South Carolina Coastal Council, 45 STAN. L. REV. 1433, 1435 (1993) (noting the many doctrinal peculiarities in Lucas); Joseph L. Sax, The Constitutional Dimensions of Property: A Debate, 26 Loy. L.A. L. Rev. 23, 27 (1993) (arguing that Lucas unwisely restructured takings doctrine); Lawrence Watters, A Colloquium on Lucas: Introduction and Decision, 23 Envtl. 869 (1993)

(providing background on Lucas as an introduction to a colloquium on the decision). (234) Lucas, 505 U.S. at 1009.

(235) Id. at 1006-09 (discussing the decision from the Common Pleas Court of Charleston County, Larry R. Patterson, Special Judge).

(236) Id. at 1029-32. The Court noted that "many of [its] prior opinions have suggested that 'harmful or noxious uses' of property may be proscribed by government regulation without the requirement of compensation." Id. at 1022. Specifically, the Court listed a long line of cases sustaining a state's police power to enjoin public nuisances. Id. (citing Goldblatt v. Hempstead, 369 U.S. 590 (1962) (law effectively preventing continued operation of quarry in residential area); Miller v. Schoene, 276 U.S. 272 (1928) (order to destroy diseased cedar trees to prevent infection of nearby orchards); Hadacheck v. Sebastian, 239 U.S. 394 (1915) (law barring operation of brick mill in residential area); Mugler v. Kansas, 123 U.S. 623 (1887) (law prohibiting manufacture of alcoholic beverages)). (237) Letter from Joseph L. Sax, Research Studies and Services, to Peter M. Greenwald, District Council, South Coast Air Quality Management District 3-6 (Aug. 4, 1992) (on file with author). (238) Id. at 34 ("The Lucas opinion strongly emphasizes the presence or absence of a pre-existing property right. If 'the proscribed use interests were not part of his title to begin with,' there can be no taking of those interests." (quoting Lucas, 505 U.S. at 1027)). (239) Id. at 4.

(240) Id. at 4-5

(241) Id. at 5-6 ("A building and or the land on which it sits would surely, in most cases, be valuable for some other use.").

(242) 114 S. Ct. 2309, 2312 (1994)

(243) Id. at 2314-15

(244) 483 U.S. 825 (1987)

(245) Dolan, 114 S. Ct. at 2317 (citing Nollan, 483 U.S. at 837).

(246) Id. at 2319.

Susan A. Austin, Judicial Clerk, Chambers of Judge Wllliam C. Canby, Jr., Ninth Circuit Court of Appeals; J.D. 1995, Harvard Law School; A.B. 1991, Stanford University. I wish to thank my advisor, Professor Joseph W. Singer of Harvard Law School, for his.guidance and Professor Harold J. Krent of Chicago-Kent College of Law, Illinois Institute of Technology, for his insightful comments.