Regulatory Takings in Oregon

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Regulatory takings is center stage in Oregon again. A regulatory taking (also called inverse condemnation) occurs when government regulation deprives a property owner of all economically viable use of property. The State must pay owners just compensation for taking property through regulation. The defeat of Measure 7 (see Condit, Insiders #262 & #282; Hoobyar, Insider #263) in the Oregon Supreme Court, and the failure of post-Measure 7 legislative efforts, pushed the issue of regulatory takings to the wings, if not backstage, of the public debate. A recent case from the Oregon Court of Appeals, however, thrusts regulatory takings back in the spotlight.

On September 24th, 2003, the Court of Appeals ruled that Coast Range Conifers, LLC (CRC) is entitled to just compensation for its inability to harvest nine acres of private timberland to comply with state regulations to protect bald eagles. Coast Ranger Conifers, LLC v. State of Oregon, (Slip Op. Sept. 24, 2003). CRC owned a 40-acre parcel of timberland on which two bald eagles and a nest had been observed. CRC sought approval from the State Forester to harvest part of the parcel. The State Forester eventually approved CRCs timber harvest plan with a nine-acre buffer area around the bald eagle nest. CRC proceeded to harvest 31 acres of the parcel. After the eagles appeared to have abandoned the nest, CRC filed a new plan to harvest the remaining nine acres. The State Forester denied the plan and the Board of Forestry upheld the denial. CRC then sued the State for a regulatory taking of the nine acres and ultimately prevailed at the Court of Appeals.

The case is a win for CRC on two grounds. First, it rejects what is known as the "whole parcel" rule, which states that for there to be a regulatory taking a property owner must be deprived of all economically viable use of the whole parcel of property, not just a portion. In CRC's case for example, the company was precluded from harvesting only nine acres of its 40-acre parcel. Rejection of the whole parcel rule means that property owners can obtain just compensation for the regulatory taking of a portion of a parcel. Just how small the portion of a parcel can be and still be entitled to just compensation is not clear, but rejection of the whole parcel rule eases somewhat a property owner's burden of proving a regulatory taking. Second, the Court of Appeals finds a regulatory taking of CRC's nine acres and orders that just compensation be paid. On this second point, however, the value of the case for regulatory takings proponents is shaky at best because the court's analysis questions the very existence of regulatory takings under the Oregon Constitution.

The Court of Appeals begins its regulatory takings analysis in Coast Range Conifers by noting that the Oregon Supreme Court increasingly has embraced a method for interpreting the Oregon Constitution that heavily relies on historical analysis to determine the Framers 'intent. The Supreme Court has in recent cases stated that regulatory takings exist under Article I, section 18 (Oregon's takings clause), but the Supreme Court never has applied its historical methodology to that provision of the Oregon Constitution. According to the Court of Appeals, history may not bear out that the Framers intended Oregon's takings clause to include regulatory takings because that concept postdates the Oregon Constitution. The Court of Appeals follows the Supreme Court's recent Article I, section 18 cases in ruling for CRC, but in questioning the historical validity of those cases it has turned the spotlight back on regulatory takings.

The State has asked for an extension of time to petition the Oregon Supreme Court to review the case. If the Court accepts the petition, it may apply its historical analysis methodology as suggested by the Court of Appeals. The outcome of an Oregon Supreme Court opinion is by no means certain, however. The United States Supreme Court long has held that the Fifth Amendment of the US Constitution allows for regulatory takings claims. That precedent may still hold sway with the Oregon Supreme Court. However, especially in recent years, the Oregon Supreme Court has been willing to depart from federal cases interpreting the US Constitution and find a different meaning in the Oregon Constitution. Thus, if the Court of Appeals has read the history correctly, it is possible that the Oregon Supreme Court would abolish regulatory takings under the Oregon Constitution (the US Constitution's acknowledgment of regulatory takings still would apply in Oregon). While the likelihood of such an outcome is uncertain, even a remote possibility of such a result means that this is an important case for all property owners in Oregon and one to watch if it goes to the Oregon Supreme Court.

Stoel Rives represents CRC in this case.

Originally published in Oregon insider, Issue #331, November 1, 2003.

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