544 U.S. 528, 537 (2005)
In 1997, the State of Hawaii had a highly concentrated wholesale oil market due to its small size and isolation over 1,600 miles from the mainland, with only two refineries and six gasoline wholesalers operating in the state.1 Chevron U.S.A. Inc. was the largest refiner and marketer, controlling 60 percent of the in-state gasoline market and 30 percent of the wholesale market on Oahu.2 Gasoline was sold at retail through approximately 300 service stations, about half leased by oil companies to independent lessee-dealers.3
Chevron operated 64 such lessee-dealer stations under arrangements where it leased land, constructed stations, and leased them to dealers while setting wholesale prices and requiring supply contracts.4 In June 1997, the Hawaii Legislature enacted Act 257, which capped the rent oil companies could charge lessee-dealers at 15 percent of gross profits from gasoline sales plus 15 percent of other product sales, and imposed other restrictions on station ownership.5
Thirty days after enactment, Chevron filed suit in the United States District Court for the District of Hawaii against the Governor and Attorney General, challenging the rent cap.6 The parties stipulated that the cap would reduce aggregate rent on 11 of Chevron's stations by about $207,000 per year but allow increases on the remaining 53, potentially raising overall rental income by nearly $1.1 million annually, and that Chevron had not recovered station maintenance costs through rent alone over the past 20 years.7
The District Court granted summary judgment to Chevron.8 On appeal, the Ninth Circuit vacated the judgment and remanded the case.9 After a one-day bench trial featuring competing expert economists, the District Court entered judgment for Chevron.10 The Ninth Circuit affirmed, and the Supreme Court granted certiorari in 2004.
Whether the "substantially advances" formula announced in Agins is an appropriate test for determining whether a regulation effects a Fifth Amendment taking?11
The Takings Clause of the Fifth Amendment, made applicable to the States through the Fourteenth, provides that private property shall not be taken for public use without just compensation.12 Regulatory takings challenges outside narrow per se categories are governed by the Penn Central factors, which focus on the severity of the burden government imposes upon private property rights and the magnitude of any economic impact.13 The "substantially advances" formula, by contrast, is derived from due process precedents and asks only whether a regulation is effective in achieving a legitimate public purpose.14
No. The formula reveals nothing about the magnitude or character of the burden a particular regulation imposes upon private property rights, nor does it provide any information about how any regulatory burden is distributed among property owners.15 In this case the parties stipulated that Act 257 reduces by about $207,000 per year the aggregate rent Chevron would otherwise charge on 11 of its 64 lessee-dealer stations, yet allows Chevron to collect more rent at its remaining 53 stations and still earn a constitutionally adequate return on its investment.16 Chevron has not established that it was singled out to bear any particularly severe regulatory burden.17 The gravamen of its claim is simply that the rent cap will not actually serve Hawaii's asserted interest in protecting consumers against high gasoline prices, an inquiry that does not sound under the Takings Clause.18
Related opinions on this issue
This separate writing is to note that today’s decision does not foreclose the possibility that a regulation might be so arbitrary or irrational as to violate due process.21 The failure of a regulation to accomplish a stated or obvious objective would be relevant to that inquiry.22 Chevron voluntarily dismissed its due process claim without prejudice, however, and we have no occasion to consider whether Act 257 of the 1997 Hawaii Session Laws represents one of the rare instances in which even such a permissive standard has been violated.23
With these observations, I join the opinion of the Court.24