SCOTUS « Disasters, Property, and Politics

Today the US Supreme Court handed down their decision in Murr v. Wisconsin. In a 5-3 vote (Justice Kennedy writing for the majority, Justice Gorsuch not participating), the Court determined that there was no regulatory taking in this case.

In takings parlance, Murr v. Wisconsin what we refer to as a regulatory takings case. That is, it’s a case in which the title of the property remains in the hands of the owners (so no physical taking), but a regulation on the property may have changed the land’s uses in such a way that the owners no longer can find economic benefits in the land. In the case of the Murrs’ property, as already mentioned, the Supreme Court upheld an opinion in which there was no regulatory takings in this case. In doing so, they also reaffirmed several key regulatory takings cases, including Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency (535 US 302), Lucas v. South Carolina Coastal Commission (505 US 1003), and a takings case I’ve written a lot about, Palazzolo v. Rhode Island (533 US 606).

To better understand Murr, here are a few facts from the case (I’m simplifying here for brevity — I’ll do more detail in a future post):

Mr. and Mrs. Murr had purchased Lots E and F in a particular area along the St. Croix River in Wisconsin separately at two different times in the 1960s. They used the land for recreational/vacation purposes, and maintained the two lots under separate ownership for tax purposes until they transferred them to their children (Lot F in 1994 and Lot E in 1995). At that point, the two lots came under one ownership (with multiple individuals owning the land). Their children, who are the petitioners in this case, wanted to sell Lot E in order to pay for improvements to Lot F. They sought variances from the St. Croix County Board of Adjustments, but were denied the request. The Board said that because the lots had been unified in their ownership in the 1994/1995 transactions, they could no longer be sold separately under a local zoning regulation. The question for the Supreme Court, then, had much to do with whether a taking occurred when these owners were told that they could not sell Lot E without selling Lot F. The petitioners contended that the economic benefits of Lot E had been completely removed by the regulation and therefore they should be compensated for a regulatory taking.

Writing for the Court, Justice Kennedy argues that while it’s long been understood in regulatory takings jurisprudence that if a regulation goes too far it can be recognized as a taking, he explains that in this case there’s no regulatory taking because the land can still be used for economically beneficial purposes. Murr is an interesting case in part because it presented a question that is key to the analysis of regulatory takings: What is the proper unit of property against which to assess the effect of the challenged governmental action? In other words, can a part of a parcel be used in a regulatory takings analysis? Or does it have to be the parcel as a whole? Today’s decision says it’s the parcel as a whole, and how we know the whole parcel has to do with the zoning regulations of the locality.

The Court determined that a lower court decision had correctly determined that the petitioners could not have reasonably expected to sell the lots separately given the current zoning laws. The lower court had found that combining the lots lessened their value by less than 10%, which was not enough to declare a takings under Lucas and other regulatory takings cases. From the US Supreme Court’s perspective, the issue of which unit of property to use in a regulatory analysis was key to deciding the case. Since they agreed with the lower court that the appropriate unit was the entire parcel, and not the separate lots, they also found that the regulation had not decreased the economically beneficial uses of the land enough to work a regulatory takings.

The majority opinion is, of course, more complex than I’ve written here. I’ll be doing another post soon that will go into more detail, and will also take a closer look at the language around Palazzolo v. Rhode Island. There’s also a very interesting dissent that was filed by Chief Justice John Roberts, in which he argues that the majority’s opinion undermines regulatory takings jurisprudence in a way that will make it very difficult for any regulatory takings plaintiff to succeed in the future. Logan will be taking a closer look at the dissent in an upcoming post. We agreed this morning that it deserves its own analysis partly because this decision was so close. Presumably, had Justice Gorsuch participated he would likely have agreed with the Chief Justice. That would have made the decision 5-4. That, to me, suggests that the next justice of the Supreme Court may be the deciding vote in moving regulatory takings jurisprudence onto a different course should we have another conservative justice appointed to the Court. On the other hand, if the next justice is a liberal, we’ll continue to see 5-4 and 6-3 splits on these cases.

Just by way of a reminder, when it comes to physical takings, the Court has been much more unified. We can see that in recent cases such as Arkansas Game and Fish v. US, in which a temporary physical takings was found when an area was repetitively flooded. That decision was unanimous, and written by Justice Ruth Bader Ginsburg, well known as one of the most liberal justices on the current court (some would say she’s the most liberal, but I suspect Justice Sotomayor may overtake her given time).

Next month, the Supreme Court will hear oral arguments in Utility Air Regulatory Group v. US Environmental Protection Agency. The agency actions under scrutiny involve the regulation of greenhouse gases, which directly links the case to larger political debates concerning climate change, science and policy. A good deal of our environmental policy is based upon the best available science and requires using the best available technology for implementation. Of course, when that science is changing due to new advancements, or results are disputed among scientists — or if it’s simply unpopular with the public regardless of scientific consensus — policies and regulations that have as their basis scientific understandings of our environment become tender spots in the political life of our polity. They are the points of some of most the heated discussions and, quite frankly, frustrations over how to proceed into the future.

The link between this case and climate change, then, makes it particularly important. It also makes it particularly complicated, so I’ve been patiently waiting for the oral arguments and rereading case law and reviewing the agency decisions that led to the court case. It’s a bit complicated, but here’s a basic summary of what I’ve been reading. Because Utility Air Regulatory Group is a continuation of a dispute that was heard as Massachusetts v. EPA in 2007, so I’m going to go back over what happened there before summarizing the issues presented before the Court now.

Massachusetts v. EPA

Massachusetts v. EPA (540 US 497) was decided by the US Supreme Court in 2007 after working its way through the administrative process and the DC Circuit. The Supreme Court ordered the EPA to reconsider a denial to a petition for rule making on new motor vehicle greenhouse gas emission standards. The petition, which invoked the Clean Air Act section 202(a)(1), was filed with the EPA in October 1999. It was brought by a group of states and private organizations responding to scientific findings demonstrating that climatological and environmental changes had been directly linked to significant increases in the atmospheric concentrations of “greenhouse gases”. Since these gases are produced by the engines in motor vehicles, the states and organizations who petitioned the EPA asked them to set create emission standards for new vehicles. They argued that “greenhouse gases” should be classified as air pollutants, a classification that had to be made before the EPA could create rules for regulating new vehicle emissions. In other words, the first step the EPA had to take before they could create emission standards for new vehicles was to find that the greenhouse gases were air pollutants. In order to do this, the EPA would have to launch a process aimed at deterring whether or not the greenhouse gases could “be reasonably anticipated to endanger public health or safety.”

It took nearly four years for the EPA to act on the petition, but ultimately they denied it for several reasons as laid out in their denial. In their press release, they very clearly stated the most basic reason they did not want to regulate motor vehicle emissions for greenhouse gases: the EPA did not have authority under the CAA to create binding regulations concerning global climate change. Jeff Holmstead, Assistant Administrator for the Office of Air and Radiation, explained: “Congress must provide us with clear legal authority before we can take regulatory action to address a fundamental issue such as climate change…We cannot try to use the Clean Air Act to regulate for climate change purposes because the Act was not designed or intended for that purpose.”

The EPA also expressed the view that regulation of greenhouse gases could be done best through greater fuel efficiency standards, but this was an area that the Department of Transportation had authority over. Indeed, President Bush had announced a program for addressing these issues through fuel economy improvements in the early part of 2002. Therefore, said the EPA, they were concerned they would create regulations that could, possibly, contradict or simply reiterate the Department of Transportation’s regulations. Thus, even if they had the authority to do so, the EPA did not want to regulate greenhouse gas emissions for fear of creating conflict among the different agencies within the government.

There was another reason they cited in their decision that is very interesting for the administrative law teacher in me. They argued that regulations aimed at global climate change constituted an “extraordinary” situation with a “unique political history”. Citing a case involving tobacco regulation (FDA v. Brown & Williamson Tobacco Corp.), the EPA argued that absent direct Congressional Authority, they did not believe the Clean Air Act could be construed to provide a basis for regulations addressing global climate change. Because of the unique political history of climate change policy, a delegation of authority by Congress for this issue would need to be explicit, said the agency, before it could move forward with rule-making. The EPA’s decision as published in the Federal Register on September 8, 2003 can be found here. While some might read this as the EPA ducking the controversial aspects of climate change politics (a reading I partly agree with), I also think it was an agency recognizing that it needed at least one other branch to weigh in before it acted. I say one branch or another because I can’t believe that the EPA had no idea that a citizen-suit would not be filed in the case. It could be they hoped that such a suit would be mooted before it got to Court by Congressional action, but given the attitude of Congress at that time toward climate change matters, I would think everyone knew that a lawsuit was more likely than legislation.

A group of states and organizations did indeed file suit in federal court, asking that the EPA be ordered to regulate greenhouse gases under the CAA. The DC Circuit (415 F.3d 50, 367 U.S. App. D.C. 282 (D.C. Cir. 2005)) found that while the EPA had the authority to regulate greenhouse gas emissions for new motor vehicles under the Clean Air Act, the agency could decide not to exercise that authority. Their decision resulted in an appeal to the Supreme Court.

The Supreme Court decided the case in 2006. Finding that the harms from climate change were both serious and well-recognized, the Court determined that the economic, social and health consequences allowed the regulation on the Clean Air Act. Moreover, the process the EPA had not actually disputed the connections between man-made greenhouse gas emissions and global warming, and for this reason their decision, said the Court, contributed to the injuries suffered my Massachusetts through the consequences of global warming. The Court ordered the EPA to reconsider. If it decides to exercise its statutory authority to regulate greenhouse gas emissions, the Court said the EPA would need to provide a basis for its reasoning that was grounded in the language of the statute, not in other policy concerns.

On remand, the EPA made an endangerment finding (74 Fed. Reg. 66,497 (Dec. 15, 2009)). In essence, what this means is that the EPA decided that the scientific research to date concerning the impact of climate change on human health, climate, and ecosystems, was compelling enough to suggest that climate change was, indeed, impacting the public welfare. Since greenhouse gases had been shown in the scientific studies to contribute to climate change, then the greenhouse gases could be regulated. This finding allowed them to move forward with a rule-making.

In the comments to the EPA during their consideration of the endangerment issue, commenters raised the issue of whether the scientific research was adequate for such a finding. Their point was clear: the Court in the Massachusetts had stated that “the statutory question is whether sufficient information exists to make an endangerment finding”. These commenters believed that “the scientific uncertainty is so profound that it precludes EPA from making a reasoned judgment as to whether greenhouse gases contribute to global warming.” They urged the EPA not to make an endangerment finding. However, ultimately the EPA disagreed and determined that the best available scientific evidence pointed to a link between greenhouse gases and climate change. Since that was the case, they had a duty to regulate emissions of these gases under the Clean Air Act.

They set about doing a rule making. Within a few months, the EPA created standards regulating the emission of gases from certain new motor vehicles (75 Fed. Reg. 25,324 (May 7, 2010)). But they went a step further: in April and June of 2010, the EPA also implemented permitting requirements for certain stationary sources of greenhouse gases. Stationary sources include industrial plants and power plants, among other industrial activities. The vehicle emissions standards as well as the standards for stationary sources were challenged by a variety of groups in court. It’s those challenges that are embodied in the current case pending before the Supreme Court.

Utility Air Regulatory Group v. EPA

The new standards were challenged on the grounds that the scientific basis for the standards themselves was flawed, but the stationary source challenges are a little different. While the states and industry groups on this side of the dispute have argued that the tailpipe regulations are flawed, the argument against the stationary source standards is that the agency has no authorization to regulate greenhouse gas emissions from stationary sources. From the EPA’s perspective, once the greenhouse gases were considered air pollutants and they had a duty to regulate them under the Clean Air Act, they could not stop with the tailpipe emissions — they had to include other sources of greenhouse gases in order to ensure that the carried out the CAA. The challenges to their regulations were unanimously rejected by a three-judge panel of the US Court of Appeals for the District of Columbia Circuit over a year ago.

Intriguingly, when the Supreme Court accepted the petitions seeking review of this decision, they consolidated several of the cases into one, and then limited the issue they would review to whether the EPA could “permissibly determine that its regulation of greenhouse gas emissions from new motor vehicles triggered permitting requirements under the Clean Air Act for stationary sources that emit greenhouse gases.” To be clear: the Court will not be considering whether the new vehicle emissions are problematic. They will only consider whether the EPA has the authority to extend their authority to stationary sources. In so doing, the Court has accepted the EPA’s authority to regulate emissions from motor vehicles. They also leave the central finding in Massachusetts v. EPA in tact, though there is a potential for limiting the EPA’s authority to regulate greenhouse gas emissions.

Whether or not the EPA can extend the logic of regulating motor vehicles to other stationary sources, however, remains to be seen, and appears to be the most important issue on the minds of the Justices of the Supreme Court. Because stationary sources include power plants, industrial plants and other large businesses, the economic costs of new regulations have been of great concern to many groups, states and the communities in which those plants exist — and provide jobs. It will be very interest to see whether or not the Court sides with the EPA given the economic impacts such a decision would have. On the other hand, if they limit the EPA’s authority, they will have to explain how those limitations work in light of their earlier decision in the Massachusetts case, and may very well invite more litigation focused on the EPA’s regulatory authority as a result. The more I have read the cases, findings and decisions, and contemplated economic impacts as well as health impacts of greenhouse gases, the more I wonder just how Solomonic the Court is feeling these days.