California Eminent Domain Report

The Clean Water Act requires states to identify rivers and creeks that fall below specified water quality standards.  Those water bodies are thereafter designated as "impaired" by the Environmental Protection Agency, and certain standards are imposed to limit pollution and runoff. 

If a river or creek's designation results in a nearby property suffering a decrease in value, does the property owner have standing to seek removal of the designation?  In Barnum Timber Co. v. United States Environmental Protection Agency, the Ninth Circuit Court of Appeals held that such a nearby owner suffering a diminution in property value did have standing. 

Barnum Timber Company, which was represented by the Pacific Legal Foundation, owns property and conducts timber-harvesting operations in the Redwood Creek watershed near Eureka, California.  Barnum argued that its property value decreased when the adjacent Redwood Creek was listed as "impaired."  In particular, Barnum claimed that the listing fed "the public's and the market's perception that Barnum's timber operations are restricted by the listing."  Barnum presented declarations from two Registered Professional Foresters, each explaining that when a listing occurs, the public perceives that the property will be subject to additional and onerous regulation, and the market reaction devalues the property. 

Based on the evidence presented, the Ninth Circuit agreed with the concept that "regulatory restrictions on one property that affect the uses to which a second property can be put [can] lower the second property's value."  The Court also agreed that a regulatory restriction need not be the "sole source of the [property's] devaluation."  The Ninth Circuit therefore held that Barnum -- based on the alleged property dimunition -- had standing to seek removal of the impaired listing.

While the Barnum Timber case strictly deals with the issue of standing, it will be interesting to see whether property owner advocates use the opinion to open up a new door of potential regulatory takings cases where a regulation on one property impacts the value of another property.  The Barnum Timber case may also arguably provide support for a regulatory takings claim where a property owner suffers a dimunition in value from a variety of factors.