Environmental Law 101

Friday, April 30, 1999

To think clearly about property rights and the environment, we must expose the false conflict that is said to separate them. Our initial query should ask how the cause of environmental protection would fare if all we had at our disposal were the traditional principles of property law. How well would the faithful application of these principles protect the environment?

THE LAW OF NUISANCE

Illustration by Ismael Roldan

My first point is that every owner of property must worry about the actions of his neighbors. To the extent that one person, as an owner of property rights, insists that he have unlimited rights to use his property just as he pleases, then, under the principle of parity, he must concede to his neighbors the same unlimited use of their property. Stated bluntly, nothing in the theory of property rights says that my property is sacred while everybody else’s property is profane. That single constraint of parity among owners should lead every owner to think hard. The more usage rights he claims for himself, the more usage rights he must allow to others. The more he limits the uses of others, the more he must limit his own uses. This system of parallel restrictions on the use of property will rarely lead to the toleration of any and all uses of property. For example, if you woke up in the morning and took a deep breath of a mixture of carbon monoxide and sulfurous acid, you would be prompted to say, “You know, I’m willing to stop that kind of activity even if it follows that I can no longer inflict the same misery on my neighbors.”

This recognition of the noxious uses of private property is the source of the common law of nuisance. That law dates from medieval times, certainly by 1215, at the time of the Magna Carta. It is no new socialist or environmentalist creation for the twentieth century. When the common law of nuisance restricts the noxious use of property, it benefits not only immediate neighbors but the larger community. If I enjoin pollution created by my neighbor, others will share in the reduction of pollution. Simply by using private actions, we have built a system for environmental protection that goes a long way toward stopping the worst forms of pollution.

ENTER THE GOVERNMENT

Yet before we leap for joy, we must recognize that private actions are not universally effective in curbing nuisances. Sometimes pollution is widely diffused—waste can come from many tailpipes, not just one—so that no one can tell exactly whose pollution is causing what damage to which individuals. Under those circumstances, private enforcement of nuisance law can no longer control pollution. Now the task of the lawyer and system builder is to find a coherent way for government action to pick up the slack in environmental protection. The governing principle is simply this: Wherever it’s hard to organize private actions against admitted wrongdoers, then it is permissible to resort to direct government regulation, either to stop the pollution before it begins or to fine the perpetrators when and where it occurs. We do not change the substantive standards of right and wrong, but we do use state regulation to fill in the gaps in private enforcement. So, with tailpipe emissions, a believer in property rights should say, “Look, if it is practical to use private actions against all drivers on the Santa Monica freeway, by all means do so. But since we all know that’s an administrative impossibility, state regulation of tailpipe emissions is clearly a noncontroversial use of government power.” Public enforcement of antipollution norms should take into account the severity of the harm just as private rights of action should.

WIDE-OPEN SPACES

These simple arguments use a set of common-law property rights to allow for both private and public enforcement of the nuisance law. But often when individuals worry about their local environments, they’re not particularly happy to treat the nuisance law, however enforced, as the upper bound of their personal protection. They want (especially as their wealth increases) more by way of aesthetics and open spaces. Fortunately, our legal system has a way to accommodate these newer demands. One of our most important land-use control devices is the system of covenants by which all the holders of neighboring lands agree among themselves and for their successors in title (that is, for anybody who takes their land by sale, gift, or will) that they will abstain from certain kinds of behavior in exchange for imposing parallel restrictions on other owners. So if members of a homeowners’ association want to keep, for example, open spaces for the benefit of all subdivision residents, they can use contracts and deeds to make sure that each owner dedicates a portion of his land for open space. Or they could acquire in their common name some open spaces. Or they could form a governance structure that allows for future provision for open spaces. These possibilities for the development of, as it were, a private sort of environmental protection are not simply hypothetical devices. They are routinely used with great success throughout the United States. The richer our population, the greater its willingness to spend resources on environmental protection. Most people want to equalize the benefits that they provide for themselves privately in their houses and publicly in their open and our shared spaces. For many years our legal system has provided them with devices to achieve these results in a perfectly coherent fashion.

ENTER THE GOVERNMENT (AGAIN)

In addition, it is possible to identify at least one other device to advance the cause of environmental protection: government purchase or, if necessary, condemnation. Let us suppose that some valuable natural landmark is of no particular value to its owner but of great value to the public at large. However unfashionable it may sound to some people, that natural landmark could be purchased in one of two ways. A private nature conservancy group could decide to buy this resource in its natural condition to prevent any rival from doing so. That approach falls squarely within the classical property rights system, for the nature conservancy is just as legitimate a bidder as an industrial plant. In contrast, if no private bidder is available, a strong popular sentiment in favor of acquisition could lead the state to buy or condemn that property for public use, which includes its preservation for environmental ends. Specifically, the state can purchase or condemn at a fair valuation any valuable form of habitat for the benefit of some endangered species. There is both a private consensual means and a public coercive means to preserve the environment. Compensation—but only when it is fully calculated—is the lubricant that prevents government abuse from taking place.

In sum, the system of public and private enforcement of nuisances and public and private purchases of environmentally sensitive sites is the way that sound environmental policy should proceed. Here the state can stop wrongful conduct without compensation but cannot limit the ordinary use of property unless it is prepared to provide compensation. Requiring compensation in the second class of cases has the added benefit of introducing some democratic responsibility into the process of state regulation; it helps makes the costs visible to the public at large. That in turn will require environmentalists to make the benefits visible as well. Once both costs and benefits are on the table, it becomes possible to enter into an intelligent public debate as to whether the anticipated benefits justify their associated costs.

THE MODERN SYSTEM: FROM SENSE TO NONSENSE

Ironically, the environmental work done today in the United States often takes a very different form. The tension between property rights and the environment invites a titanic struggle because the traditional rules of nuisance, restrictive covenants, and purchase and condemnation are regarded as only minimal first steps for dealing with the problems we face. But what does this alternative legal system look like? What drives it?

To place these issues in perspective, let me mention a couple credos of the modern environmental movement. One holds that any change in the external world involves the commission of some form of environmental harm. The movement thus builds into the calculus an extraordinary preference in favor of the status quo. Sometimes this preference goes beyond the odd to the grotesque. Much environmental litigation has taken place over the question of whether a landowner is entitled to clean up a mess on his property that was left by some industrial plant decades ago in order to facilitate useful development. The system simply doesn’t trust private people to behave in a responsible fashion even when they will both incur the costs of the cleanup and derive many of the benefits that it produces.

From this initial point comes the further claim that it is always possible to harm the environment even if one does no harm to one’s neighbors. We now have a set of rules that allows us all to become busybodies in the lives of one another whenever there is any alteration of land, be it building or parking pad or removing old vegetation and putting new plants in its place. The threshold for government intervention is sharply lowered. Any alteration in land will do it, even if it is “harm” to your own property. The upshot is that each owner starts to have powerful veto rights over all her neighbors—rights that are sometimes exercised for bad reasons as well as good ones. The law thus encourages perpetual conflict between neighbors over every use or alteration. Ownership no longer provides a zone of freedom. Instead it simply marks out the person who must first obtain a government permit to initiate change. And if one permit can be required, why not a thousand?


Requiring the government to provide compensation introduces some democratic responsibility into the process. Once both costs and benefits are on the table, it becomes possible to enter into an intelligent public debate.


THE POWER SHIFT

The upshot is a massive shift of the political center of gravity from the individual to the state. The traditional view of property allowed an owner to do something on his land until a neighbor could show tangible harm from his activities. That rule has been displaced by one that says no action can take place until approvals have been obtained and that these will not be allowed until you have ruled out all possibility of environmental harm, not only to your neighbors’ but to your own land. The government’s ability to issue permits, and to issue them on onerous conditions, institutes an odd form of tyranny that will both hamper the cause of environmental protection and give rise to vast antagonistic political struggles that produce much heat but little light.

Ultimately, then, the modern system fails because it does not trust that private incentives will work. In the end, it cannot believe that property owners will act in a rational fashion to protect their own property.

MADNESS AS USUAL: THE DEL MONTE DUNES CASE

One recent illustration of the problem is the California case that is right now before the United States Supreme Court: Del Monte Dunes Corporation v. City of Monterey, which examines the conditions that the city is entitled to impose on building permits. The case represents a pattern of conduct that is far too usual. A valuable plot of land located along the coast had previously been used as a petroleum tank farm; signs of industrial use were still scattered about the premises. A developer announced that he would like to build a 344-unit development on this littered dump site. But for this asocial act he needs to get a permit. Now, a permit would make sense (as would a private action for injunction) if the new construction threatened to create a landslide on neighboring property. But here the only worries the city could flag didn’t come close to that kind of adverse negative impact.

What the city could show was worry about a potential habitat for the Smith’s blue butterfly, which is found elsewhere in California but which has never been observed on the Del Monte Dunes site. The site merely contained some growth of buckwheat plant that could host the Smith’s blue butterfly if it were present. So the landowner was told that to build on this site he had to protect the buckwheat. It was therefore an absurd case of habitat preservation for an absentee species.

Today such habitat preservation is an obligation that is imposed, without compensation, on the landowner for the benefit of the public at large. Yet common sense makes it clear that you cannot have a stable political regime by telling individuals that they must always make personal sacrifices for social gain. That strategy will naturally provoke resistance and resentment. After all, the Smith’s blue butterfly was in some sense a matter of convenience for antidevelopment forces; if it hadn’t been there to serve their purposes, then they would have sought some other reason to stop the development in its tracks. The truth was that the city and the antidevelopment forces didn’t want development at all.

Such matter is seldom stated in so blunt a fashion because candor has its price. Whenever the state tells a landowner that her property must remain worthless for all time—in order to protect butterflies, of course—then it might be caught by the constitutional prohibition against taking property without just compensation. But this legal rule kicks in automatically only in that extreme circumstance in which all development is flatly prohibited. The law is far grayer when that same end is achieved through delay and dissimulation. The current constitutional position invites the government agency to drown the landowner in due process. Never just turn the applicant down; string the process out. Bounce the permit approval process back and forth endlessly, involving city, county, state, and federal regulators. Back it goes, again and again, with more delays and costs—but no finality. To some, this description of the process may sound like an amiable exaggeration. But consider that the initial application to develop the site in Del Monte Dunes was made eighteen years ago, in 1981, and only now is winding its way up to the Supreme Court.

WHERE DO WE GO FROM HERE?

In Del Monte Dunes, the Supreme Court must address two questions. First, was this a total wipeout of the value of the land? Second, was there any realistic environmental justification for imposing these restrictions on development?

Requiring governments to pay compensation for imposing these restrictions helps encourage political responsibility. It forces democratic bodies to weigh not only the benefits of their actions but also the costs. And compensation encourages transparency, forcing government officials to address this hard question: “Who benefits by refusing to allow new people to live in Del Monte Dunes?” Can anyone identify millions of dollars in gains from giving Smith’s blue butterfly a habitat it will never use?

CHANGING THE INCENTIVES

Now let’s suppose that we were to change the incentive structures a little bit. Suppose the government is willing to back off on regulation without compensation. One consequence would be that owners might continue to protect the habitat because they would not thereby forfeit all development rights for nothing. After all, most people who live in the wild are attached to the land even if they are also attached to their pocketbooks. They like the wild, which is why they’re there. And if the government wants to preserve the habitat, well and good, it can buy it. At this particular point, the habitat is no longer a liability to the landowner; it’s now an asset. By virtue of shifting the government role from coercion to cooperation, the new legal rule makes the target of government action—the landowner—an ally. Instead of encouraging the willful destruction of property, the law now encourages its systematic preservation.

At this point it is possible to find a creative role for government in environmental preservation. But it only arises because we limit its coercive powers over private individuals. Yet, ironically, the creative role is one others can assume as well, for nothing prevents private groups from buying habitat for preservation. Because of their flexibility and independence, these organizations could well do a better job than state agencies, who have to work through the cumbersome eminent domain process. Ordinary contracts now work, and the increased domain of choice for private landowners should reduce hard feelings as these markets are better developed. Money becomes the lubricant that makes hard transactions move more easily.

All this is not to say that state power should always give way to voluntary purchase. I have no doubt that if somebody wants to go out with a gun and exterminate all members of some rare bird species, the only appropriate response is to punish him. To buy him off is to invite a run on shotguns, for enough dubious characters would be willing to brandish a shotgun and yell, “Hey, pay me off too, buster!” That cannot be allowed to work. So long as new entrants can destroy the wildlife, then the only way to stop them is by the use of force. Alternatively, when only one person owns the habitat, the voluntary purchase of the habitat by the government does not invite the same reckless follow-on behavior by other persons. The government as owner now has title to the habitat—title that is good against the rest of the world.

THE MEN OF 1215

The lesson that we should take away from these examples is that good, rudimentary economic theory gives a clear view of the issue. It may well be that the men of 1215 did not understand the fine points of the common-law system they developed. But they surely built better than they knew. In large measure our job is not to dismantle the structures they put together but to explain why they rest on firm foundations that should be respected and applied to the problems of our time. In a free society we should always use our modern intellectual tools to explain and defend our ancient and honorable institutions. That proposition applies to environmental protection and property rights as much as it does to any other area.