Department of Natural Resources v. Indiana Coal Council, Inc.

• Decision Date: 31 August 1989
• Docket Number: No. 19S00-8802-CV-263,19S00-8802-CV-263
• Citation: 542 N.E.2d 1000
• Parties: DEPARTMENT OF NATURAL RESOURCES and Wabash Valley Archaeological Society, Inc. and Council For the Conservation of Indiana Archaeology, Inc., Appellants, v. INDIANA COAL COUNCIL, INC. and Huntingburg Machinery & Equipment Rental, Inc., Appellees.
• Court: Indiana Supreme Court

Page 1000

542 N.E.2d 1000

DEPARTMENT OF NATURAL RESOURCES and Wabash Valley

Archaeological Society, Inc. and Council For the

Conservation of Indiana Archaeology, Inc., Appellants, v. INDIANA COAL COUNCIL, INC. and Huntingburg Machinery &

Equipment Rental, Inc., Appellees.

No. 19S00-8802-CV-263.

Supreme Court of Indiana.

Aug. 31, 1989.

Tom C. Huston, David F. Hamilton, Arend J. Abel, Barnes & Thornburg, Indianapolis, for Wabash Valley and Council for The Conservation of Ind. Archaeology, Inc.

Linley E. Pearson, Atty. Gen., Steven J. Szostek, Deputy Atty. Gen., Myra P. Spicker, Indianapolis, for Dept. of Natural Resources.

Mark W. Rietman, Buthod Longest Clark Rietman & Steedman, Evansville, for Huntingburg Machinery & Equipment.

G. Daniel Kelley, Jr., Stephen M. Terrell, Ice Miller Donadio & Ryan, J. Nathan Noland, Indianapolis, for Indiana Coal Council, Inc.

DeBRULER, Justice.

This is an appeal from the Dubois Circuit Court and the determination there that certain provisions of Indiana's version of the Surface Mining Control and Reclamation Act ("SMCRA"), I.C. 13-4.1-1-1, et seq., and regulations promulgated thereunder, 310 I.A.C. 12-2-1, et seq., as applied by the Indiana Department of Natural Resources to land owned by Huntingburg Machinery & Equipment Rental, Inc. ("HUMER") amounted to an unconstitutional taking under the Fifth Amendment to the Constitution of the United States. Under Appellate Rule 4(A)(8), this Court has exclusive jurisdiction to hear cases in which a statute has been declared unconstitutional, and because of the important constitutional issues involved, transfer is granted.

The land at issue, owned by HUMER, is currently being farmed but sits atop three seams containing approximately 1.537 million tons of mineable coal. In a small, 6.57 acre portion of the land, sitting on top of approximately 55,200 tons of coal, lies what has become known as the Beehunter Site, an archaeologically significant area, rich in cultural deposits with substantial historic and scientific value. The Beehunter Site's importance stems from the fact that below the plow zone it contains a substantially intact "midden," with artifacts from four distinct cultural periods of occupation, which would allow anthropologists to make cross-cultural comparisons of different adaptations to the same environmental niche. The site was nominated and found eligible for listing on the National Register of Historic Places. 51 Fed.Reg. 6677 (1986).

The Wabash Valley Archaeological Society, Inc. ("Wabash Valley") petitioned the Department of Natural Resources ("DNR") to have the site designated as an area unsuitable for surface coal mining under I.C. 13-4.1-14-2. The director of DNR may declare an area unsuitable for surface coal mining if the coal mining operation will "affect fragile and historic lands in which the operation could result in significant damage to important historic, cultural, scientific, and esthetic values and natural systems." I.C. 13-4.1-14-4. A public hearing was held and on November 19, 1985, pursuant to this provision and Wabash Valley's petition, the director made an initial determination that Beehunter was an area unsuitable for surface coal mining. By this time the Indiana Coal Council ("Coal Council") and the Council for the Conservation of Indiana Archaeology ("CCIA") had entered the proceedings. The Coal Council and HUMER filed timely objections and a hearing was held on December 19, 1985, pursuant to I.C. 4-22-1-12 (repealed 1986). A final order was issued by the director of the DNR on January 3, 1986 designating the Beehunter Site unsuitable for surface coal mining.

As part of his final order, the director included a mitigation plan which provided a means by which the designation of "area unsuitable" could be removed. It calls for a program of site testing and data recovery conducted by an archaeological contractor approved by DNR. The plan does not require HUMER to carry out the plan, to expend any money, or to convey any property or property right to the State. It affects no existing contractual rights. In fact, the designation does not prevent HUMER from continuing to farm the land, nor from mining virtually all of the coal under its farmland, so long as the coal that lies underneath the 6.57 acre Beehunter Site is extracted by means other than strip mining, a process which would destroy the archaeological information contained in the site. For these reasons, and those delineated below, we hold that the director's order, designating the Beehunter Site as an area unsuitable for surface coal mining and providing a mitigation plan by which the designation may be removed, does not amount to an unconstitutional taking of property.

The Fifth Amendment provides that "[no] private property [shall] be taken for public use, without just compensation," and, of course, applies to the states through the Fourteenth Amendment. This seemingly simple mandate has become increasingly difficult to apply as the complexities of modern life have necessitated a wide variety of land use regulations. More than sixty years ago, Justice Holmes recognized that "[g]overnment hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law," Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413, 43 S.Ct. 158, 159, 67 L.Ed. 322, 325 (1922), but also noted that "while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking," id., 260 U.S. at 415, 43 S.Ct. at 160, 67 L.Ed. at 326. The difficulty has been in devising rules that establish a line between regulation that is permissible and that which "goes too far." Consequently, the determination often rests on "ad hoc factual inquiries" involving the facts and circumstances of each particular case. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 508, 107 S.Ct. 1232, 1254, 94 L.Ed.2d 472, 503 (1987) (Rehnquist, C.J., dissenting), citing Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631, 648 (1978).

However, we are not without guidance in this area. Recent United States Supreme Court cases have provided a two-prong test as an aid in making the determination. Under this rule, when applied to a particular piece of property, a land use regulation will not effect a taking if it substantially advances a legitimate state interest and does not deprive an owner of economically viable use of his property. Nollan v. California Coastal Comm'n N.E.2d 1003 483 U.S. 825, 834, 107 S.Ct. 3141, 3146, 97 L.Ed.2d 677, 687 (1987). Until recently, the inquiry generally focused on the second of the two prongs, attempting to determine the economic impact of the regulation on the land. See Keystone, 480 U.S. 470, 107 S.Ct. 1232, 94 L.Ed.2d 472; Penn Central, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631. In Nollan, however, the Court emphasized the first prong in striking down a condition placed upon the granting of a zoning variance, finding that the condition did not substantially advance the interests sought to be achieved by the regulation. The two prongs are indicative of the various guises that a constitutional attack on a land use regulation may take.

The essence of the first prong of the test is whether government had the right to exercise its police power in the manner it did, regardless of the burden to the property. Or, in other words, it asks the question: has government regulated where it should not have done so? If the regulation does not bear a substantial relation to the legitimate ends sought to be achieved, either through a failure of the statute as a whole to serve those ends or as applied to a particular piece of property, then the exercise of the police power is deemed to be unreasonable. A variation of this type of challenge would exist where the ends themselves were not legitimate. The state could not, for example, regulate property simply because it does not agree with the religious or political views of the land owner. See Williamson Co. Regional Planning Comm'n v. Hamilton Bank, 473 U.S. 172, 202 n. 1, 105 S.Ct. 3108, 3125 n. 1, 87 L.Ed.2d 126, 149 n. 1 (1985) (Stevens, J., concurring).

The economic inquiry of the second prong of the test has its roots in Justice Holmes's decision in Pennsylvania Coal, 260 U.S. 393, 43 S.Ct. 158, 67 L.Ed. 322, which is generally regarded as the seed from which all modern regulatory taking cases have grown. In that case, a Pennsylvania statute requiring that a certain amount of coal be left unmined so as to prevent subsidence to the surface estate was struck down as unconstitutional because it interfered with the distinct investment-backed expectations of the owners of the mineral estate and did not provide compensation for the coal that was "taken." This consideration for distinct investment-backed expectations remains essential today. See, Kaiser Aetna v. United States, 444 U.S. 164, 175, 100 S.Ct. 383, 390, 62 L.Ed.2d 332, 343 (1979); Penn Central, 438 U.S. 104, 124, 98 S.Ct. 2646, 2659, 57 L.Ed.2d 631, 648. It is also necessary to examine the economic impact of the regulation on the claimant in terms of the diminution in value of the land, id., and the extent of any interference with the present use of the land, Penn Central, 438 U.S. at 136, 98 S.Ct. at 2665, 57 L.Ed.2d at 656. In determining the degree of diminution in value, the particular segment that is affected is not considered alone, but the claimant's property as a whole is compared to that portion which is encumbered. Keystone, 480 U.S. at 497, 107 S.Ct. at 1248, 94 L.Ed.2d at 496. Of course, the nature and character of the interference is also relevant, and where a regulation results in permanent physical occupation of property, a taking will almost invariably be found. Id., 480 U.S. at 488-489 n. 18, 107 S.Ct. at 1244 n. 18, 94 L.Ed.2d at 490 n. 18; Loretto v. Teleprompter...