The Eminent and Inverse Environment – Interplay Between Environmental Issues and Condemnation

“THE EMINENT AND INVERSE ENVIRONMENT – The Interplay Between Environmental Issues and Condemnation” was presented to the Tarrant County Bar Association, Environmental Law Section in Fort Worth, Texas on February 27, 2014, by Mary Colchin Johndroe,  The following summary contains highlights of the presentation.

In a statutory condemnation, the condemnor compensates the property owner before appropriating property.  If the government appropriates property without first paying adequate compensation, the property owner may bring a claim for inverse condemnation to recover resulting damages.  In both, statutory and inverse condemnation, a pivotal issue is compensation due to the landowner – which is typically measured by the difference in fair market value of the affected property before and after the taking. 

In Texas condemnation law, market value generally reflects all factors that buyers and sellers would consider in arriving at a sales price.  Environmental contamination, costs of remediation, and perception in the marketplace most assuredly can influence the value of a property.  

Texas courts have not yet decided if evidence of environmental contamination, potential liability for contamination, and remediation costs is admissible as relevant to market value of property taken by condemnation.  Although Texas case law has not specifically addressed these issues in the context of eminent domain, courts in at least thirteen (13) other states have determined the admissibility of evidence of environmental contamination and remediation of property taken in condemnation.  

The majority of courts follow an “inclusion approach,” holding that evidence of environmental contamination and the costs of remediation is relevant to fair market value and, therefore, relevant to a determination of just compensation in eminent domain proceedings.  Some courts follow an “exclusion approach,” with some excluding all evidence of contamination, while others have held that evidence of remediation costs is inadmissible, but property taken should be valued as remediated, as opposed to being clean and never contaminated.  The latter approach holds that evidence of the reduction in value of property caused by stigma attributable to environmental contamination is admissible.

In November of 2012, the Fourteenth Court of Appeals in Houston affirmed stigma  damages awarded for loss in market value resulting from prior  contamination  which  had been remediated. However, this was not a condemnation case. 

An inverse condemnation may occur when the government physically appropriates or invades the property, or when it unreasonably interferes with the landowner’s right to use and enjoy the property, such as by restricting access or denying a permit for development.  

The Texas Supreme Court has held that landowners have a constitutionally-protected, compensable property interest in groundwater and that State regulations cannot “unjustifiably” deprive landowners of the groundwater beneath their land.  At least one governmental entity has been held liable in inverse condemnation for denying permits for groundwater pumping and usage for irrigation. 

Moreover, Texas courts have allowed a claim by one private party against anotherfor trespass based on subsurface migration of water injected in a well permitted by TCEQ.  Regardless of a private party’s tort liability, constitutional concerns remain.  

Might governmental entities tasked with regulating groundwater or wastewater injection wells who issue permits resulting in migration onto other property and contamination of its water supply be liable for inverse condemnation?