Eminent Domain Report

As we've reported in the past, temporary takings are compensable in California.  But such claims are not easy to prove, particularly when you're dealing with the federal government imposing temporary regulations preventing use of property.  A recent case, Reoforce v. United States, demonstrates some of the hurdles an impacted property owner may face.

In Reoforce, the plaintiff discovered a mineral deposit called pumicite on federal land in Kern County, California.  Believing the deposit had potential value for paint and fiberglass applications, Reoforce submitted a mining claim in accordance with federal law and applied with the Bureau of Land Management (BLM) to mine approximately 100,000 tons per year.  After obtaining necessary approvals, Reoforce slowly began mining for the mineral, but only sold 5 tons over an eight-year period.

The property was then transferred into a California state park, and the BLM issued new regulations which (i) restricted mining for some types of mining claimants until additional approvals were obtained, but (ii) allowed other mining claimants to continue operating on an interim basis.  It was unclear whether Reoforce could continue to operate, and due to the regulations and turmoil within the company, Reoforce did not undertake any mining for a 13 year period.  Eventually, it was finally once again granted approval to mine.  Reoforce thereafter filed a lawsuit for a temporary taking, alleging that the cessation in mining due to government regulation was a temporary taking of its property rights.  Reoforce sought just compensation under the Fifth Amendment.

The court held that Reoforce had not stated a takings claim because the temporary prohibition on mining did not amount to a taking under the Penn Central test.  That test applies to potential regulatory takings, and requires an analysis of:

• the economic impact of the regulation,

• the extent to which the regulation has interfered with distinct investment-backed expectations, and

• the character of the governmental action.

Here, the court concluded that the temporary government regulation, even if it completely prevented mining, had a minimal impact on Reoforce since it was several years away from ever engaging in commercial production of its mineral deposits.  The court likewise concluded there was no interference with reasonable investment-backed expectations since the mining operation was a heavily regulated industry, which Reoforce was aware of when entering into the operations.  Finally, the court concluded that the character of the governmental action favored a finding of no liability as Reoforce was not singled out or targeted, but instead was subject to a broadly applied regulation along with numerous other claimants within the area.

The Reoforce case is a good reminder of the uphill battle a property owner faces when pursuing a temporary regulatory takings claim.  Each case will continue to be analyzed on a fact-specific basis:  the court will continue to focus on the government's conduct, and whether a property owner has been singled out and forced to bear a significant economic impact.