It is not uncommon for many agencies to request that applicants for environmental permits accept conditions to those permits such as payment of money for site remediation. When the agency goes too far, the actions may be unconstitutional.
This issue was addressed in the United States Supreme Court in Koontz v. St. John's River Water Management District. In Koontz, an applicant for a permit to develop on wetlands declined to pay money for outside remediation as demanded by the regulatory agency. He challenged the constitutionality of the agency's demands under the 5th Amendment constitutional right to just compensation.
In a 5 to 4 decision by Justice Samuel Alito, the Supreme Court ruled that there are restrictions on what a government can demand in its approval of land use, regardless of whether it is a request for a permit or the condemnation of property. When an agency demands payments as a condition to the granting of a permit, the agency must show that there is a nexus in what it has requested and what the permit grants. This nexus must be roughly proportional to what the permit requests. The government agency demands cannot outstrip the effects of the proposed land use.
Coy Koontz, an owner of land in the Florida wetlands, wished to develop a portion of the wetlands that he owned. He offered the St. John's River Water Management District a substantial conservation easement in his application. The District rejected that offer and stated that, in exchange for the permit, the District must either receive a larger conservation easement or Koontz must pay for the remediation of nearby land owned by the District.
The Florida Supreme Court ruled in favor of the District and stated that a request for money payments in exchange for a permit was not the taking of a particular property interest. The United States Supreme Court reversed the Florida court.
The Court, in Justice Alito's opinion, discussed the "Unconstitutional Conditions Doctrine" which prohibits the government from coercing people into giving up constitutional rights. The Court extended prior precedent regarding the taking of property to the extraction of cash payments. The Court determined that, in requiring payment for the District's remediation project, the District had, in effect, unconstitutionally "taken" property without "just compensation." The Court found that the "government may choose whether and how a permit applicant is required to mitigate the impacts of a proposed development, but it may not leverage its legitimate interest in mitigation to pursue governmental ends that lack an essential nexus and rough proportionality to those impacts." Here, the District was pursuing a governmental end that did not have a central nexus to the impacts for which a permit was sought.
Although this is a close decision, it does raise the specter of additional litigation where, as a permit condition, some monetary payment has to be made. This could place courts in the position where lines must be drawn over whether or not a payment request has an "essential nexus" to the permit application.
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