As the dust settles after the end of the U.S. Supreme Court’s latest term, the case of Koontz v. St. Johns River Water Management District is causing some uncertainty, if not angst, among wetland regulators and environmental proponents. Under its previous rulings, the Court has held that certain government “demands” for property rights in exchange for permits run afoul of the Constitution’s Takings Clause. These permit conditions must have a nexus and rough proportionality to development impacts; otherwise, they are deemed unconstitutional exactions under what is known as the Nollan-Dolan standard. Koontz involved the question of whether the Nollan-Dolan standard applies to off-site mitigation and the expenditure of funds.
In a 5-4 opinion, the Court replied in the affirmative to both questions, and private property rights advocates rejoiced. Koontz, however, is a complicated decision, and it is just as important to note what the Court did not decide.
The Court stated that it was not deciding that the Florida statute that Koontz sued under applied to a Nollan-Dolan claim (so that may be dealt with on remand). It did not decide whether the water management district’s “demands” were specific enough to trigger a Nollan-Dolan claim or whether they were simply part of permissible negotiations. Even if the “demands” did trigger a claim, the Court did not decide that the requested off-site mitigation lacked a nexus or rough proportionality to the impacts. And even if there was a Nollan-Dolan violation, the Court declined to say what the remedy might be.
So what was the Court willing to decide?
It recognized that agencies can insist “that landowners internalize the negative externalities of their conduct.” It noted that that permitting authorities can “insist that applicants bear the full costs of their proposals[.]” And it stated that the government has a “legitimate interest” in wetland mitigation―but the mitigation must have a nexus and rough proportionality to the development impacts.
What does this all mean for agencies, developers, and the public? As one learns in law school, the answer is always: “It depends.” But even Justice Alito agrees that agencies can still require developers to offset the “full costs” of the environmental impacts of their projects. The key is ensuring that the agency can demonstrate the linkage between the permit conditions and impacts. (For example, an agency might wish to point out the dismal record of mitigation failures to justify mitigation ratios higher than 1:1.) The danger is that agencies might take the path of least resistance and grant permits with fewer mitigation conditions.