Sam owns an acre of land on Red River. The government dams the river. A lake forms behind the dam, covering Sam's land. Does the government owe Sam anything? If so, what, if no, why?
The government clearly owes Sam something. We cannot know exactly how much it owes him because we do not know how valuable Sam’s acre of land is. The issue that you are asking about here is covered by the Fifth Amendment. The relevant portion of this amendment reads “…nor shall private property be taken for public use, without just compensation.”
From this, it is clear that the government has to give Sam “just compensation.” From the part of the Fifth Amendment quoted above, we know that, in order to qualify for compensation, Sam has to have “private property” and his property must then be “taken for public use.” From what you say in your question, the acre is clearly Sam’s private property. Just as clearly, the government has taken that land. By inundating it with water, the government has taken it and made it so that Sam cannot use that land in any way. The taking has presumably been done for public use. The public will benefit from the electric power generated by the dam, the dam’s role in flood prevention and/or navigation, and the recreational uses of the new reservoir/lake. Therefore, all of the criteria for a taking have been met and the government has, legally speaking, taken Sam’s land.
Because the government has taken Sam’s land, it has to pay him “just compensation.” There is no way for us to know how much that is because we do not know how valuable Sam’s land was before the dam was built. However, we do know that the government owes Sam whatever the value of the land was. The Fifth Amendment guarantees that Sam will be compensated for his loss.
In this scenario, the government has not actually "taken" the land. In other words, when the government created the dam, it may not have even considered the effect the dam might have on contiguous land or it may have simply not done appropriate due diligence to determine that Sam's land would be adversely impacted by the dam. In order to "take" land legally, the government must follow legal and regulatory requirements. In this case, the government is at least guilty of willful negligence, and it may have also violated trespass laws, both of which can carry civil and, in the case of trespass, criminal penalties. To violate trespass law, one can either illegally go onto another's property or cause another element, water, for example, to encroach another's property.
Because the government did not follow the legal and regulatory procedures for eminent domain, the government may be liable for amounts above those determined by "just compensation" calculations. By ruining Sam's property, the government has permanently diminished anyone's ability to determine "just compensation" because the property is no longer in its optimal state. In some jurisdictions, Sam might also be able to sue the government for a violation of his civil right to own and use property as he wishes even though the U. S. Supreme Court has recently relegated property ownership to a lesser than constitutional status.
The government owes Sam the current fair market value of his land. The Fifth Amendment to the Constitution assures the government cannot seize property without just compensation. Flooding of land and rendering it unusable amounts to a seizure and requires compensation.
This has long been the view of the Supreme Court and a recent court case in Arkansas has furthered the compensation to even temporary flooding when the government releases water from dams in water control situations.
When these situations arise the legal problems usually revolve around when the seizure takes place. Sometimes the government will announce a flood in hopes of reducing land value and thereby lowering their liability when the flood actually overtakes the land. As a general rule courts have determined the seizure to occur when the government makes an overt action to complete the flooding such as beginning construction of the dam. However payment does not have to be rendered until the land is actually flooded. The first is the de facto seizure used for calculating value and the second is actual seizure for payment due.