In Koontz v. St. Johns River Water Management District, a private landowner applied for a permit to develop wetlands on his property.  Both the Landowner and the District proposed different conditions to mitigate the damage that would be done to the wetlands. Neither party could agree to the size of the conservation easement needed or the amount to be paid to a contractor to repair off-site wetlands. The District denied the permit and the Landowner sued, claiming that denying the permit constituted a ‘taking’ or an unconstitutional limit on the use of private land by the government.

The 5^th Amendment protects private property from being ‘taken’ by the government without just compensation.  Two court cases have established that when a government applies conditions to the approval of a permit, the conditions must be ‘roughly proportional’ and have an ‘essential nexus’ to the impact of the development in order to not be a taking (the Nollan and Dolan test). This test balances protection of the public and environment from the impacts of private land development, with the mitigation burdens put on private landowners.

In Koontz, the Landowner claimed that the conditions imposed by the District were not proportional and did not have an essential nexus to the impact his development would have on the wetlands. Thus, they were an unconstitutional taking of his land.

The Supreme Court agreed with the Landowner, which changes what was previously thought to be subject to the takings clause. Now, the denial of a permit and a condition that requires a landowner to pay a monetary fee to conserve off-site land could constitute a taking. Additionally, the court found that the District cannot require that the Landowner compensate damages on land that the District holds, since they were responsible for issuing the permit.

The result of this decision will have far reaching impacts on how landowners and governments negotiate development projects, likely increasing litigation against municipalities and the flat out denial of development project that could be approved or approval of plans that shouldn’t.  In general, governments may now think twice about suggesting conditions for projects, even if landowners ask, in efforts to avoid being sued.

This decision will also impact mitigation banking nation-wide. First, it cements the fact that the governments issuing permits may not require, as a condition, improvements on lands that they hold.  This may result in less mitigation on public land and more action for free market mitigation banks. However, the court is clear that a condition that requires payment to mitigate off-site lands is valid, so long as it meets other constitutional requirements.

Second, the court clarifies what other constitutional requirements must be met, namely the Nollan and Dolan test. Here, the court found that the conditions were a ‘taking’ because the mitigation land was too far away from the impact site (several miles) and the proposed ration for acres restored to acres developed was too large (13.9 acres of preservation and 50 acres of enhancement to 1 acre impacted).  Mitigation banks and governments may struggle with finding the appropriate compensation levels, since the decision does not expand on what would have been appropriate.

However, according to Species Banking, it “should be noted that the Court clearly recognized the importance of mitigation in the context of permits involving the use of natural resources. Perhaps mitigation banks aren’t the gold standard of compensation when viewed through the eyes of this latest legal decision.  But judging it by its years of experience, mitigation banking still makes good environmental sense (not to mention regulatory sense), even in light of the sector’s latest benchmark.”