Summary: The Supreme Court’s recent exactions decision in Koontz v. St. Johns Water Management District has prompted concerns that it will stifle the compensatory mitigation practices of environmental and natural resources permitting agencies. The form of Koontz phobia is unfounded for three reasons: (1) the statutes and regulations under which the agencies work already require the practices Koontz incorporates; (2) the agencies already compile studies justifying their assessment of development harms and mitigation benefits; and (3) those antecedent administrative findings regarding harms and benefits are entitled to judicial deference. The only new burden Koontz places on agencies working in environmental and natural resources permitting, therefore, is to connect the dots between harms and benefits to demonstrate their nexus and proportionality—a demand one surely hopes the agencies can bear.

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By  J.B. Ruhl

Three tightly-interconnected decisions make up the Supreme Court’s constitutional doctrine governing the permissibility of “regulatory exactions”—conditions a land use regulation authority imposes in a land development permit as a purported quid-pro-quo for permit issuance. Nollan v. California Coastal Commission , 483 U.S. 825 (1987) , held that when a land use authority issues a negotiated development permit through an adjudicative process, it may condition that permit on the landowner’s granting of a land dedication exaction—in that case a public easement across the land—only if the benefits of the condition bear an “essential nexus” to mitigating the harms caused by the development. In Dolan v. City of Tigard , 512 U.S. 374 (1994) , the Court added to Nollan the requirement that the harms and the benefits bear a “rough proportionality” in terms of magnitude, in that case finding that a city had not adequately demonstrated that match when conditioning a commercial building expansion permit on the owner’s granting of an easement for a public hike and bike trail to offset some the expected new traffic load. In both cases the Court emphasized that the government bears the burden of proving its exaction satisfies the standards.

Nollan and Dolan caused quite a stir in land use law circles, drawing particular ire from the cadre of legal scholars who have criticized any movement of the Court in the direction of strengtheni ng property rights through a more robust takings and exactions doctrines. To be sure, Nollan and Dolan left many questions unanswered: Do they apply only to onsite land exactions such as easements? Do they apply only to one-off negotiated land use permits, and thus not to legislatively-set, formulaic exactions such as the impact fees many cities have adopted by ordinance? But given the fact that many states had imposed similar or more demanding requirements on state and local permits for decades prior to the Court’s decisions as a matter of state law, the case that Nollan and Dolan rocked the land use world, while a nice theoretical story for law reviews, is difficult to make based on the practical experience.

The third of the case triplets to hatch, Koontz v. St. Johns Water Management District , 133 S.Ct. 2586 (2013) , has generated the same kind of agitated pushback by many land use and environmental law scholars—that is, all theory and little practical reality. Koontz confirmed what should have been obvious: Nollan and Dolan (1) apply to negotiated monetary exactions tacked onto a permit condition, and (2) apply when the land use authority denies the permit because the applicant refused to accept the exaction as a condition. Common sense supports this approach. After all, if a land use authority could get around Nollan and Dolan simply by demanding money, it could take the money and use it to exercise eminent domain to get the land it wants. And if it can avoid Nollan and Dolan simply by dangling the permit (with conditions) in front of the applicant’s face and say “no” if the applicant does not say “yes,” Nollan and Dolan would never come into play. The possible availability of a due process claim for the first scenario and a regulatory takings claim for the second provide little comfort—the cards are stacked high in the government’s favor for both claims.

Nevertheless, Koontz has been skewered by some legal scholars, with one deeming it “a blow to sustainable development” and, comparing it to decisions on affirmative action, voting rights and same-sex marriage, predicting that it “may turn out to have a profound impact on American society.” Even Justice Kagan, in dissent, declared that Koontz would “work a revolution in land-use law.” These are claims that demand practical proof, but there isn’t any. Indeed, as with Nollan and Dolan , the Koontz principles have been enforced in a number of states for decades, including in California and Florida, and there is no evidence that these states and their local governments have been brought to their knees. Indeed, quite the opposite—local governments have responded to the self-discipline the Court has demanded by developing reliable tools for evaluating and assessing exactions, and have made wide use of them with considerable success in courts. It is, therefore, quite unclear exactly where all the Koontz phobia is coming from.

Most of that experience, however, has unfolded in the local land use context. Koontz is likely to extend Nollan and Dolan into previously uncharted territory—compensatory ecological mitigation conditions of environmental and natural resources permits, such as occurs in the U.S. Fish and Wildlife Service’s (FWS) Habitat Conservation Plan (HCP) permitting program under the Endangered Species Act (ESA). Although these programs are functionally land use regulation regimes, agencies like the FWS do not usually attempt to exact on-site easements as compensatory mitigation. The HCP and similar programs have relied instead on conditions for providing offsite mitigation, including paying money to a third party “mitigation bank” that has restored resources or paying “in-lieu” fees to an entity that will arrange for mitigation. Nollan and Dolan , therefore, had not made much of an appearance in the environmental and natural resources permitting world before Koontz , which now clearly extends the doctrine to permit conditions relying on mitigation bank payments, in-lieu fees, and other techniques of compensatory mitigation. Yet, even here there is no cause for alarm, for three reasons.

First, agencies like the FWS operate under statutory and regulatory regimes that incorporate the Nollan / Dolan standards into the compensatory mitigation program. The ESA, for example, requires that the FWS evaluate impacts to the species from the applicant’s proposed activity and require the applicant to “minimize and mitigate such impacts .” 16 U.S.C. 1539(a)(2)(A)(ii). By statute, therefore, the FWS must establish the essential nexus and rough proportionality of any compensatory mitigation demand.

Second, agencies like the FWS are adept at building a scientific record of evidence to support their findings regarding impacts and appropriate mitigation. They have to do their homework, or else they will face a difficult time in court defending a permit condition against claims that it fails to meet the statutory standards.

Third, when they have done their homework, agencies like the FWS enjoy considerable judicial deference when challenged on their assessments of impacts from development and the benefits of compensatory mitigation. For example, when the FWS delineates an area within the permit development footprint as habitat of a species protected under the ESA and evaluates the harm to the species from the applicant’s proposed action, courts defer to those findings unless they are arbitrary and capricious.

All Koontz adds to this picture is that agencies like the FWS , using their antecedent administrative findings regarding harms of the proposed actions (e.g., destroying 10 acres of a species’ habitat) and benefits of the compensatory mitigation (e.g., restoring 15 acres of the species’ habitat), demonstrate the essential nexus and rough proportionality between the two. The agency’s findings regarding development harms and mitigation benefits are not part of the agency’s Nollan / Dollan burden of proof—they are administrative findings subject to judicial deference. Rather, the agency bears only the burden of proving that those findings establish the essential nexus and rough proportionality requirements. Given what the permitting regime already requires, that task should be no more demanding than telling a connect-the-dots story, a burden one would hope agencies could bear and sustain. To be sure, Koontz thus constitutionalizes what legislatures and agencies have already demanded of environmental and natural resources permitting programs, but that’s the point of Koontz —the Court wants to keep it that way.

Like other phobias, Koontz phobia is an overwhelming and unreasonable fear of a situation that poses little real danger but provokes anxiety and avoidance. Many state and local land use authorities have lived under state versions of Nollan / Dollan / Koontz for decades, and many state and federal environmental and natural resources agencies have lived for decades under statutory and regulatory regimes the replicate the doctrine. They’ve learned to deal with it. You can too, Koontz phobics. There’s no reason to be afraid.

 

J.B. Ruhl is the David Daniels Allen Distinguished Chair of Law and Co-director of the Energy, Environment and Land Use Program at Vanderbilt Law School. Before joining the Vanderbilt faculty in 2011, Mr. Ruhl was the Matthews & Hawkin Professor of Property at the Florida State University College of Law. Mr. Ruhl is recognized as an expert in environmental, natural resources, and property law and has been widely published in these fields. Mr. Ruhl earned his J.D. at the University of Virginia and holds a Ph.D. in Geography from Southern Illinois University.

 

 

 

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