Regulatory Taking - Regulatory Taking Themes - Permit Exhaustion - The Denominator Problem

The Denominator Problem

In the Penn Central Case, the Supreme Court ruled that taking law does not divide property into discrete segments and therefore a taking occurs only when an owner's entire ownership is excessively regulated, and the owners are therefore not entitled to compensation where a part of their land remains economically viable. This gave rise to the question of what is the "denominator" of the ownership fraction; i.e., what is the larger ownership whose part is being subjected to confiscatory regulation, since the regulatory taking of a part of it (the "numerator") is not compensable.

The question thus arises: What is the "denominator" of the regulated parcel? For example: in Pennsylvania Coal Co. v. Mahon (260 U.S. 393) Pennsylvania Coal owned the mineral rights in a property (as well as the right to surface support under Pennsylvania law), and Mahon owned the surface rights of that land. Relying on Pennsylvania statutory law, the surface owners wanted mining under their land stopped to prevent subsidence. The court agreed with the coal company and held that the state statute forbidding such mining was a taking of the coal company's property.

Thus, the Pennsylvania Coal Company suffered a 100% taking, because all of its property (the underground coal deposits) had been effectively extinguished by the regulation. It could no longer extract its own coal. On the other hand, under the more recent Penn Central approach, if one defines the "denominator" as the total property rights in a particular parcel (i.e., both surface and mineral rights), then there would be only a partial taking, because the mineral rights were only a part of the total rights in the property (even if those rights were distributed between two owners). This theory was more recently applied by the U S Court of Appeals in Whitney Benefits v. United States, holding that a federal regulation forbidding strip mining of large coal deposits in Wyoming, took the owners' property, requiring payment of compensation which, with interest and attorneys' fees, came to $200 million

In his dissent to Pennsylvania Coal Justice Brandeis argued that inasmuch as the police power regulation promoted public safety, the state statute forbidding mining under inhabited land trumped the coal company's property right to its coal. That theory has gained acceptance in the Supreme Court case of Keystone Bituminous Coal Ass'n v. DeBenedictis (480 U.S. 470) but only to the extent that the prohibition of mining was partial, not total.

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