November 18, 1996
Mr. Richard Whisnant General Counsel Dept. of Environment, Health and Natural Resources
P.O. Box 27687 Raleigh, N.C. 27611
Re: Advisory Opinion: Takings Implications of Buffer Requirements in Proposed Nutrient Sensitive Waters Rules for the Neuse River Watershed
Dear Richard:
We are responding to your questions concerning the buffer requirement in the Environmental Management Commission’s proposed nutrient sensitive waters (NSW) rules for the Neuse River watershed. Below, we have set out the questions and provided a brief answer. A more general discussion as background to those responses then follows.
QUESTIONS AND ANSWERS Question 1. Does the requirement that certain riparian property owners set aside property as a buffer for non-point source pollution constitute a regulatory "taking" of private property requiring due process and compensation?
Answer: The general rule is that as long as the application of a rule does not destroy all practical use and reasonable value in the property as a whole (looking at the entire tract and not just the portion of the property affected by the rule), there will be no "taking" of property within the meaning of the Fifth Amendment of the United States Constitution. Under this standard, both buffer and open space requirements have been upheld against "takings" challenges.
Question 2. Does the Environmental Management Commission’s variance procedure provide an adequate means of addressing those situations in which application of the rules proves to be particularly burdensome to an individual property owner?
Answer: No. The variance procedure set out in N.C.G.S. § 143-215.3(e) is available only to persons subject to the provisions of N.C.G.S. § 143-215.1 and 143-215.108 (which establish the water and air pollution permit requirements) for purposes of varying water quality standards and classifications. Although some property owners within the Neuse River watershed may require state stormwater permits, the buffer requirement is neither a water quality standard nor a classification. Similar relief will be available, however, under two provisions of the proposed Neuse River rules allowing approval of alternatives to the buffer.
ANALYSIS The Fifth Amendment to the United States Constitution states as follows:
No person shall be held to answer for a capital or otherwise infamous crime, unless on a
presentment or indictment of a grant jury, except in cases arising in the land or naval
forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor
shall be compelled in any criminal case to be a witness against himself, nor be denied
life, liberty or property, without due process of law; nor shall private property be taken
for public use without compensation.
[Emphasis added.]The United States Supreme Court has long held that regulations that "go too far" may constitute a taking under the Fifth Amendment. The Takings Clause does not, however, require government to compensate property owners for every reduction in property value caused by regulatory action. The Court’s decisions recognize that to require compensation for every impact on property values would make environmental and land use regulation impossible. As the Court noted in Keystone Bituminous Coal Assn. v. DeBenedictus, 480 U.S. 470, 491-492 (1987): Long ago it was recognized that all property in this country is held under the implied obligation that the owner’s use of it shall not be injurious to the community and the Takings Clause did not transform that principle to one that requires compensation whenever the State asserts its power to enforce it.
Thus, the Takings Clause allows both state and federal government agencies wide latitude to regulate for the public health, safety and welfare without compensating for incidental impacts on property values.
The Court has also long held that a proper "takings" analysis must consider the impact of the regulation at issue on the entire property and not merely on the affected portion of the property. In Penn Central Transportation Co. v. New York City, 438 U.S. 104, 130-131 (1979), the Court held that:
"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…[but rather] in deciding whether a particular government action has affected a taking, this Court focuses…[on] the parcel as a whole.
Thus, the Court has reviewed buffer or open space requirements in light of the effect of the requirement on the entire parcel of property and not merely the part of the property set aside to meet the requirement.
As to the standard applied in regulatory takings cases, the Court has identified only two categories of cases where compensation will in every instance be required:
- Where the regulation requires the property owner to suffer a physical "invasion" of his property – no matter how minor. Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). [New York law requiring landlords to allow television cable companies to place facilities in their buildings constituted a taking even though the utilities occupied no more than 1 1/2 cubic feet]; and
- Where the regulation denies all economically beneficial or productive use of the land (unless the regulation simply codifies established common law principles of nuisance or property law). Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992).
Outside of those two categories of per se takings, courts review takings claims on a case by case basis. The standard has been stated slightly differently in different courts. The North Carolina Supreme Court has held that the appropriate standard for review of a regulatory takings claim is whether: (1) the regulation constitutes a legitimate exercise of the police power; and (2) the affected property retains "a practical use and a reasonable value" after application of the regulation. Finch v. City of Durham, 325 N.C. 352, 364, 384 S.E.2d 8 (1989). This approach essentially tracks the United States Supreme Court’s analysis in Agins v. City of Tiburon, 447
U.S. 255 (1980).
Other decisions describe the standard as a three-part test: (1) the economic impact of the regulation; (2) the extent to which the regulation interferes with reasonable investment-backed expectations for the property; and (3) the character of the government action (i.e. the degree of harm that the regulation seeks to prevent). See, e.g., Penn Central, 483 U.S. 104. In practice, courts have reached very similar results in applying either formulation of the standard. Courts have tended to find that no taking has occurred so long as the regulation has a legitimate public purpose and the affected property retains both use and reasonable value — even if the value of the property has been substantially reduced.
There have been a number of decisions in both state and federal courts specifically upholding open space and buffer requirements against takings challenges. See, e.g., Agins v. City of Tiburon, 447 U.S. 255 (1980) [open space and density restrictions in zoning ordinance]; Responsible Citizens v. City of Asheville, 308 N.C. 255, 302 S.E. 2d 204 (1983) [flood plain ordinance]; Threatt v. Fulton County, 467 S.E. 2d 546 (GA 1996) [fifty-foot stream buffer]; Quirk v. Town of New Boston, 663 A2d 1328 (N.H. 1995) [campground buffer zone].
One line of cases must be distinguished from the mainstream of regulatory takings decisions. Courts have tended to review requirements that a property owner dedicate property for a public purpose (such as future road expansion) under a more stringent standard. Since these "exactions" have some of the characteristics of an actual appropriation of property, they have attracted a higher degree of scrutiny. The standard applied in exaction cases, most recently in Dolan v. City of Tigard, 114 S.Ct. 2309 (1994), requires that there be an "essential nexus" between a legitimate state interest and the exaction requirement and "rough proportionality" between the impact of the exaction and its benefit. The standard described in Dolan has been applied by the Court only in review of mandatory dedication requirements.
With respect to your second question, a property owner who may be unduly burdened by the buffer requirement would not have recourse to the existing variance procedure set out in
N.C.G.S. § 143-215.3(e). The statute makes the variance procedure available only to persons subject to the permitting provisions of N.C.G.S. § 143-215.1 and § 143-215.108. Many of the persons subject to the buffer requirement do not require water quality permits. As applied to the water quality program, the statute further limits the subject matter of a variance request to the rules, standards and limitations established pursuant to N.C.G.S. § 143-214.1 (water quality standards and classifications) or 143-215 (effluent standards and limitations). The Neuse River buffer rules do not fall into either of those categories.
The proposed buffer rules, however, include at least two means of approving alternatives to the buffer. Under the proposed Rule 15A NCAC 2B.0235(c), the Environmental Management Commission may develop a matrix of Best Management Practices as alternatives to the buffer. The rule also proposes, in 2B.0235(d), to create an advisory committee with authority to approve buffer alternatives on a site-specific basis. These provisions allow for some flexibility in application of the buffer requirement so long as the property owner can achieve an equivalent level of water quality protection through alternative means.
The key difference between the alternatives provisions in proposed 2B.0235 and a variance is that variances are generally limited to persons who will suffer an undue hardship if required to comply with a rule. The EMC may approve a variance under N.C.G.S. § 143-215.3(e), for example, only on finding that compliance with the rule at issue "would produce serious hardship without equal or greater benefits to the public". The alternatives provisions in 2B .0235 do not identify the existence of a hardship as either a prerequisite for approval of a buffer alternative or a factor to be considered in reviewing an alternative proposal. As a result, the relief provided under 2B .0235(c) and (d) will be more broadly available than a variance.
The core inquiry in a regulatory takings case is whether a regulation as applied to a particular property is so unduly burdensome as to be confiscatory. Outside of the two categories of per se takings identified by the United States Supreme Court, courts generally attempt to balance the burden on the property owner and the public interest. The alternatives provisions appear to provide an adequate procedure to address those cases in which application of the buffer requirement will be unduly burdensome and equivalent water quality protection can be provided in another way.
If we can provide additional clarification, please call.
Daniel C. Oakley Senior Deputy Attorney General
Robin W. Smith
Assistant Attorney General