Legislative bill pits property rights against greater public good

HELENA - (MTFP) New legislation that zeroes in on the intersection of private property rights and government regulation is awaiting a hearing before the House of Representatives after passing through the Senate and the House Business and Labor Committee.

Proponents of Senate Bill 260 tout it as the most important property rights bill before lawmakers this session, while opponents, including Missoula County, describe it as an extreme anti-regulation measure that would hamstring state agencies’ ability to protect Montana’s land, water and wildlife.

SB 260 is what’s known as a “regulatory takings” bill. If passed, it would allow a person who has experienced a 25% reduction in the market value of their private property due to a state action  to bring a lawsuit against the state. Property is broadly defined by the measure to include real property, water and mineral rights, and intellectual property including copyrights and patents.

Such a lawsuit could be brought after a regulatory taking or eminent domain action has been “initiated” by the state, leading to questions about whether the law would apply only to new regulations or to the enforcement of existing ones as well.

Proponents of SB 260 say it will protect the interests of individuals and businesses from regulations that could hurt them financially and encourage policymakers to think carefully before putting up red tape. Opponents say the bill could subject the state to hundreds of millions of dollars in claims and disincentivize the enforcement of regulations that are important for public health and environmental protections.

During a March 16 hearing on the bill, Sen. Steve Fitzpatrick, R-Great Falls, told colleagues in the House Business and Labor Committee that SB 260 is “the most important property rights bill you’re probably ever going to come across.” 

“I don’t think we really appreciated it until COVID. We just saw the chaos and destruction that was unleashed on our economy, just with a couple of shutdown orders,” Fitzpatrick said. “This will … restore a little bit of balance between private property interest and the people of the state of Montana.”

During public testimony, bill opponent John Bowen-Hollow countered that Fitzpatrick’s approach could jeopardize lives by disincentivizing the implementation of public health measures.

“The state is going to be hesitant to do anything that is required if they can face liability,” he said. “It seems to me you endanger a lot of life in the next pandemic if you adopt this bill.”

The United Property Owners of Montana, the Montana Petroleum Association, the Montana Chamber of Commerce and attorney Mark Taylor with the Taylor Luther Group testified in favor of the measure before the House Business and Labor Committee.

Charles Denowh, policy director for the United Property Owners of Montana, a group of nearly 300 landowners spanning the state, told Montana Free Press he thinks the bill will encourage state government to take a “look before you leap” approach before implementing new regulations. He said SB 260 will encourage regulators to find more creative ways to achieve their objectives. 

“SB 260 is a way to ensure that the people receiving the benefit of regulation are sharing in the cost of it as well, so we’re not shifting those costs onto property owners,” he added.

What those costs could amount to is a question mark hanging over the proposal. Financial impacts to the state are classified as “unknown” in SB 260’s fiscal note. 

“Due to the many variables in SB 260, the fiscal impact to the state cannot be reasonably determined,” the note prepared by Gov. Greg Gianforte’s budget director reads.

A similar but more detailed proposal from 2013 that would have applied in fewer circumstances but set a lower bar for regulatory takings claims — 10% as opposed to 25% — would have cost the state an estimated $600 million over six years. That proposal, Senate Bill 284, was sponsored by then-state senator and current U.S. Rep. Matt Rosendale, a Republican, and never made it out of committee.

To produce that $600 million estimate, the budget director for then-Gov. Steve Bullock examined similar measures in Washington and Oregon. Washington estimated that I-933, a citizen’s ballot initiative that ultimately failed, could have generated between $7 billion and $9 billion in claims. Nearly 7,000 claims were brought in Oregon after it passed a similar initiative. The state estimated the potential cost of those claims to be $19.8 billion, and voters ultimately opted to overturn most of Ballot Measure 37 three years after they’d approved it. 

Anne Hedges, director of policy and legislative affairs for the Montana Environmental Information Center, testified in opposition to Rosendale’s measure in 2013, and to Fitzpatrick’s bill this session. She said she’s concerned about the breadth of regulations that could generate a takings claim under Fitzpatrick’s proposal, as well as the adoption of amendments that further broaden its scope.

“[Rosendale’s] bill had a protection for public health, safety and welfare. This bill doesn’t even have that,” she said. 

She said she anticipates that passage of SB 260 would put the state into a catch-22 situation where it will become so expensive to enforce regulations that agencies like the Department of Environmental Quality will stop policing bad actors. She said everything from gravel pits and gold mines to floodplain designations and aquatic invasive species mitigation measures could be impacted if the bill passes.

“Voluntary regulation doesn’t work. It didn’t work at [the] Zortman Landusky [gold mines], it didn’t work at the Libby mine, and it didn’t work at the Pony mine. It doesn’t work — that’s why we have regulation,” she said. “If you take away DEQ’s authority to do that, it can’t protect [people].”

Hedges also noted that the legislation cuts more than one way. If the state passes laws that restricts abortion access, for example, organizations like Planned Parenthood could bring a takings claim against the state, she said.

The most current version of the bill carves out exceptions for a handful of applications. Land-use decisions that reduce the value of a neighboring parcel of land are exempted from the proposal, for example, as are licenses and businesses pertaining to the growing, manufacturing, distribution and sale of marijuana.

Notably, SB 260 allows a “highly regulated business or industry” to bring a regulatory takings claim, which could include utility monopolies like NorthWestern Energy, according to a fact sheet on the measure prepared by Sierra Club’s Montana chapter. 

Support for the measure has been largely partisan. Thus far, all Democrats who’ve voted on the measure have opposed it. All Republicans in the Senate and on the House Business and Labor Committee have voted in support of SB 260 save for one, Katie Zolnikov, R-Billings.

As of April 13, Legislative Services has logged five comments in favor of the measure and 237 in opposition. It has not yet been scheduled for second reading before the House.