The Pennsylvania Supreme Court recently clarified two important concepts in takings jurisprudence in Machipongo Coal and Land Co. v. Department of Environmental Protection.ⁱⁱ In a decision that has been characterized as "environment-friendly," the court limited the ability of property owners impacted by government regulation to bring successful takings claims under the Tenth Amendment of the Pennsylvania Constitution.

Machipongo Coal concerned the application of the Pennsylvania Surface Mining Conservation and Reclamation Act to property in the Goss Run Watershed. After the Department of Environmental Protection and Environmental Quality Board designated certain areas in the watershed to be unsuitable for mining (UFM), two affected property owners sued. The owners claimed that the regulation effected a governmental taking of their private property without compensation.

The Pennsylvania Commonwealth Court found that the regulation had effected a taking of the parcels that contained economically viable mines. The court relied on Pennsylvania precedent to isolate the coal estate from the property owners' "bundle of rights," and it viewed the UFM designation in the context of this estate. Because the UFM designation had taken the property owners' ability to mine the surface coal, and because the only property right at issue was the coal estate, the Commonwealth Court reasoned that the regulation had taken the owners' private property. It struck down the designation as applied to the economically viable parcels.

Defining the Takings Denominator

The Pennsylvania Supreme Court reversed, ruling that the commonwealth court had incorrectly measured the impact of the UFM designation on the owners' coal estates rather than measuring its impact on their property as a whole. In other words, the supreme court said, the commonwealth court used the wrong denominator.

Defining the denominator is a crucial concept of takings jurisprudence. The numerator in a takings equation is the bundle of property rights taken by the regulation. The denominator is the larger bundle of property rights from which the numerator was taken. As the numerator grows, or as the denominator decreases, it is much more likely that courts will find that an unconstitutional takings has occurred. In an effort to reach this result, property owners often argue that the affected property right (in Machipongo Coal, the coal estate) should be severed from the larger bundle of property rights and used as the denominator.

In its decision, the Pennsylvania Supreme Court limited the ability of property owners to sever property rights from the denominator. The court noted that the denominator can be severed in three ways: temporal severance, which severs an owner's property rights into periods of time; vertical severance, which severs an owner's property rights into air rights, surface rights, and mineral rights; and horizontal severance, which severs the owner's property into geographic portions.

The court quickly rejected temporal severance, based on a recent U.S. Supreme Court case. In this case, the Supreme Court had ruled that a fee simple interest may not be temporally divided for purposes of a takings analysis.

The Pennsylvania Supreme Court also rejected vertical severance of property rights. Again relying on precedent from the U.S. Supreme Court, the court ruled that the denominator in takings cases must include all air rights, surface rights, and mineral rights. Because the Machipongo Coal landowners retained valuable surface rights in the property, the supreme court reversed the commonwealth court's determination that the UFM designation effected a taking.

However, the supreme court did not reject the concept of horizontal severance. Rather, the court formulated a framework of analysis to assist in deciding what geographic portion of an owner's property must be included in the denominator. The factors that courts must now analyze to determine whether property should be horizontally severed for purposes of a takings analysis are: unity and contiguity of ownership; dates of acquisition; the extent to which the proposed parcel has been treated as a single unit; the extent to which the regulated holding benefits the unregulated holdings; the timing of transfers in light of the developing regulatory environment; the owner's investment-backed expectations; and the landowner's plan for development.

The supreme court did not foreclose the possibility that a takings had occurred in this case. It remanded the case to the commonwealth court to determine how the parcels should be horizontally severed, and, after determining the horizontal estate, to perform a full takings analysis.

Polluting waterways as a nuisance per se

The supreme court also reversed the commonwealth court's refusal to allow evidence concerning whether mining the parcels would constitute a nuisance. The supreme court cited U.S. Supreme Court precedent for the proposition that a landowner need not be compensated for the impact of a regulation - even one that effects a taking - if the landowner's use of his property is contrary to the principles of state property law.

Polluting waterways, the Pennsylvania Supreme Court ruled, is contrary to state common and statutory law, and is a nuisance per se. As such, evidence concerning whether the landowners' parcels would pollute the Goss Run watershed was pertinent to determining whether compensation was necessary. The court remanded the issue to the Commonwealth Court to determine whether the proposed use would pollute the public waterways and thus constitute a nuisance. If so, the DEP need not compensate the landowners, even if the commonwealth court found that the UFM designation constituted a taking of their property.

The effects of Machipongo Coal

The effects of Machipongo Coal will likely be significant. The Pennsylvania Supreme Court narrowed the range of opportunities for landowners to obtain compensation for government regulations that restrict the use of property. First, the court curbed the ability of landowners to chip away at the denominator in the takings equation. In addition, the court broadened the ability of courts to refuse compensation based on nuisance-related activities of landowners. As a result of these rulings, landowners may find it more difficult to bring successful takings challenges and, even if a regulation is found to have effected a taking, to receive compensation.

ⁱ Thanks to David Kruft for his help with this article. (back to article)
ⁱⁱ2002 Pa. LEXIS 1139 (May 30, 2002) (back to article)