and California owning less than 80 acres of forest land from certain regulations under the Endangered Species Act associated with the Northern Spotted owl. In addition, we believe regulators should carefully consider the potential impact of proposed rules on private property. In contrast to the approach of the compensation bills, which do not provide tools to prevent burdens on property, we are reinventing government by developing specific ways to prevent federal programs from resulting in unreasonable burdens. The Administration is also taking action to make sure that federal programs are not duplicating State, tribal, and local programs, and transferring authority to those governments that are closer to the people. We are especially concerned with the fair treatment of middle-class homeowners, small businesses, and family farmers. We are currently developing measures to provide relief by taking action to reform programs to make them more fair and flexible. For example, we are looking at methods in the wetlands and endangered species programs that will ease or eliminate the regulatory burdens on small landowners. Proponents of statutory compensation schemes have argued that they are necessary because it is difficult and time-consuming to litigate a Constitutional takings claim in federal court. We note that a property owner who successfully litigates a takings claim is already entitled to recover attorneys fees, litigation costs, and interest from the date of the taking, a powerful aid to vindicating meritorious claims. The Justice Department has also been active in working with the courts on approaches to ensure that takings claims may be resolved quickly and efficiently, including the use of alternative dispute resolution techniques. Again, we believe that solutions that focus on the specific issues of concern are preferable to a rigid, onesize-fits-all compensation scheme. In addition, under Title IX of H.R. 9, compensation would be made from the available discretionary funds of the agency involved. If, however, there is insufficient discretionary moneys, reimbursement must be paid from mandatory funds, thus creating new mandatory spending. Title IX, therefore, could affect direct spending, and would be subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. CONCLUSION The Administration supports and values private property rights of all landowners as provided for in the Constitution. We must find ways, however, to ensure that individual property rights are protected in a manner that does not threaten the property rights of others, does not create more red tape, more litigation, a heavier tax burden on the middle class, and does not undercut the protection of human health, public safety, the environment, civil rights, worker safety. Accordingly, we oppose the compensation requirements proposed in the pending Contract Bill or in other pending legislation. Those bills are a blunderbuss approach that would provide unjust windfalls to wealthy corporations at a tremendous cost to the health, safety, and pocketbooks of middle-class Americans. Mr. CANADY. I am glad you made that clear. Mr. SCHMIDT. They are really not the right way to get at the problems that I think the people who sponsored these proposals are trying to get at. There are alternatives, and I will be glad to explore those with members of the committee. Mr. CANADY. Thank you for coming. I appreciate your testimony. I think I understand where you are coming from. I don't want to focus on the issue of the definition of a taking, because we probably would not reach agreement on that. Let me ask you, do you think the current system for compensating people and for people to obtain a remedy when there has been a taking is adequate? Do you think it is an efficient and fair way to deal with these claims? Mr. SCHMIDT. I think that what the Constitution establishes and what the courts have done in interpreting the constitutional requirement over the years reflect a basically appropriate judgment about when there should be a compensable taking. I am sure that in particular areas we can do a better job in the administration of that compensation scheme. At the Justice Department, we have been trying to do that. For example, we have been trying to develop alternative dispute mechanisms. Mr. CANADY. In principle, would be opposed to establishing some sort of mandatory arbitration procedure? Mr. SCHMIDT. Well, I am willing, and I know the Attorney General is willing, to think seriously about anything not only in the compensation area, but in any area that can present good alternatives to full-scale litigation. We have been working on trying to move the Justice Department into the area of alternative dispute resolution. It is something our people have talked about, as well as prior administrations, but, when you look at it, not a lot of people have done much about it. I would start with the fact that we believe in and intend to require people in every area to look at when alternative dispute resolution is possible. And we intend to actually put in place a mechanism to see to it that in all the areas of the Justice Department people do that. Your bottom line question, would we go so far as to commit the Government to compulsory arbitration? I would personally be willing to think about it. I think that there are some fundamental principles involved in determining whether you want the Federal Government's expenditure of funds to be determined through something other than ultimately an article III court, but I am willing to think about it. Mr. CANADY. I have a particular question to ask. On December 9, 1994, the Department of Justice settled the case of Roberge v. The United States and agreed to pay the plaintiffs in that case $338,000. The settlement was compensation for a temporary taking of the plaintiff's property. During discovery in the case, a memo was found that was sent from an Army Corps of Engineers officer in Maine to an enforcement officer. "The project officer," wrote Roberge, "would be a good one to squash and set an example." Would you explain why the Department of Justice settled this particular case and whether the discovery of the memo was a factor in the Department's decision to settle? Mr. SCHMIDT. I don't know the facts of that particular case. I would be glad to get the answer to you and respond to it specifically. But I do not know the particular case. Mr. CANADY. We would appreciate your responding to that question. And in connection with that, I would also like to know what the original settlement offer was in that particular case and the difference between the original settlement offer and the final settlement. And why there was the difference between the original offer and the final settlement offer. I would also like to know how much time and money in addition to the settlement amount the Government spent in fighting and in litigating that particular case. The National Law Journal reported that in its brief filed in Sweet Home Chapter of Communities for a Great Oregon v. Babbitt, the Government argued that the regulatory harm definition contained in the Endangered Species Act is much more narrow and requires the evidence of actual physical impacts-killing or injury— to wildlife. But the Fish and Wildlife Service seems to attribute a different definition to harm when enforcing regulations. Secretary Babbitt said when a species is listed, there is a freeze across all of its habitat for 2 to 3 years while we construct a habitat conservation plan. Could you explain the discrepancy between the two definitions of harm, the one set forth by the Department of Justice and the one set forth by the Fish and Wildlife Service? Mr. SCHMIDT. Maybe Chris would be in a position to respond. Mr. SCHROEDER. Unfortunately, Mr. Chairman, you have both of us at a disadvantage. Mr. CANADY. Perhaps what we will do on these questions- Mr. CANADY. We will submit them to you in written form and ask you to respond. Mr. SCHMIDT. If I could just make a general response. It seems to me that what you are asking are questions about the Endangered Species Act. I think our general approach to this area is that the right way to get at problems, if there are problems in the administration of the Endangered Species Act or the Clean Water Act or any other act, is to look at those problems and try to solve them. If they involve administrative failings on our part, then we should respond to those problems. The fundamental flaw in what is before you is that it does not involve that kind of individualized judgment about what should or should not be done in the endangered species area or the wetlands area or any other. It takes an abstract principle and applies it not only to those statutes but also to every other Federal Government statute in a way which has completely unforeseen and unforeseeable consequences and which imposes costs way beyond where we are now. I think just to make the general point, which I think is important, is that it is exactly that kind of particularized discussion of problems that we think is the right way to solve them, not the kind of across-the-board proposal that you have on the table now. Mr. CANADY. Thank you. Mr. Frank. Mr. FRANK. Mr. Schmidt, I appreciate your coming, and let's talk about the bill. The one thing we have before us that the Republicans have submitted is title IX of their comprehensive bill. And I want to see if I—if you share my understanding of it. It is a fairly flat statement, anything that reduces the value of the equal to 10 percent or more and then it has some exceptions and we have seen the most important exception is a limitation on any use of private property imposed pursuant to a determination by the President that the use poses or would pose a serious and imminent threat to public safety where the health and safety of other individuals who are often on the property. Would that seem to require a determination by the President for each environmental action? How often would the President have to determine that? I would assume that much of what EPA does, for instance, would put a limit of 10 percent on the property use for landfill, other things. What would your interpretation be? How often would the President have to make sump determinations? Mr. SCHMIDT. Well, I read that as an extraordinarily narrow exception which is intended to get at circumstances where the President of the United States himself literally makes a determination that the imposition of a limitation is necessary and that standard is a very tough one. I would think if that were the only exemption available, in order for EPA to function or indeed other government agencies to function, we would have to go to the White House every morning and go through a list of things and ask whether the President will approve these. I think what is intended is that it will almost never happen and in the rare circumstance Mr. FRANK. I would agree. There are a few other limitations. I don't want to unduly minimize the bill. It does say that any limitation imposed regarding the Federal navigational servitude is prohibited. Somebody who wrote this bill lives by a river, I guess. Although I assume, again, if I were conspiratorial as my colleagues, they would decide that everything impinged on the Federal navigational servitude. I don't know if you could have a back door to a river. A back channel. And then there would be a limitation only if it violated applicable State or local law. The limitation I bring to you is the only one. The other two limitations are as I read it, a navigational servitude or a violation of State or local law. So any environmental regulation or any health and safety regulation would be exempted. And not only would the President have to do it individually, but the President has to apply-he has to say it imposes a serious and imminent threat to public health and safety. Since it says serious and imminent, if the President found that it was a serious threat to public health and safety and it was not imminent, would he be able to make such a finding? Mr. SCHMIDT. No, I don't think he would. He would have to say it was serious and imminent. Mr. FRANK. If he saw a serious threat coming, he would have to wait until it was imminent before doing anything about it. It also says it would have to be a serious and imminent threat to public health and safety or to the health and safety of workers or other individuals lawfully on the property. Now, using the only reasonable construction we can, obviously that is differentiating between the public health and safety and workers and individuals. We are talking about a numerical distinction. The public health and safety is the generality of the public, so they say even if it is not going to hurt the whole public, you can make this exception if it is going to be a serious and imminent threat to the health and safety of workers or individuals lawfully on the property. What about people who happen to be lawfully 100 feet from the property? If there was a facility not large enough to implicate the entire public health and safety, but a worksite 100 feet from the property and something happening on the property was causing a threat, would the President be able to make such a determination in this case under this statute? Mr. SCHMIDT. Presumably not under that language. Mr. FRANK. I appreciate that. I understand that we have a serious issue here, but we also have the worst written statute I have ever seen. And the relevance of that is that we are in a big hurry here with this Republican Contract. We are having this hearing. The chairman is in a rush. We are rushing through it. No opening statement because we have a bill on the floor and we have other things. And the problem, I am afraid, that we are going to take this complicated subject and under this arbitrary, self-imposed, politically motivated deadline, we are going to deal with this inadequately and the example of this is that this statute is sort of a joke. If we were, in fact, going to live by the law, administer the Clean Air Act as we now administer it and protect people with regard to hazardous substances and nuclear waste, I wonder if I could get from the administration in writing what would it cost, assuming that the President was not able to make all these findings, what would be an estimate of what it would cost the Government if we wanted to go ahead with the environmental and safety regulations we now have. And I doubt that you have that in your head. Mr. SCHMIDT. We will try to come up with it. I think one of the problems with this bill is that no one knows what that figure is. I think we know if we take the whole range of government regulation which this bill would affect that the figure is up in the billions of dollars. No one is going to be able to come up with that. We will come up with it as clearly as we can. Mr. FRANK. Let's not exaggerate. Why don't you give me a figure, then, which it could not conceivably be less than. Thank you. Mr. CANADY. Mr. Serrano. I have a couple of other questions I would like to ask. We will have a second round of questions with this witness. Mr. Frank has referred to the circumstances in which compensation is not required as defined in the bill. He focused on the second section, section B, which requires a determination by the President. I think actually the significant provision in this section is in A, which provides that a private property owner shall not be entitled to receive compensation under this subsection for a limitation on any action that would constitute a violation of applicable State or local law, including an action that would violate a local zoning ordinance or would constitute a nuisance under any applicable State or local ordinance. We can argue over the scope of this and whether this is a broad enough exemption or not. And I would not be surprised if we see some refinements in this language or other language in the bill. That is certainly not precluded in this process. But wouldn't it be true that there are at least some Federal regulatory activities that would constitute a nuisance under Federal law and that would for that-I am sorry, a nuisance under applicable State law and would not be subject to the compensation requirements or that would go to controlling activity that would constitute a nuisance and therefore would not be subject to compensation under this bill? Mr. SCHMIDT. Well, there would be some. But, of course, if something is in violation of State or local law, then we really are not in a situation where we need the protection of Federal law to deal with the problem. It seems to me where this bill has its impactand where the dangerous consequences are-is that in any area |