129 THE AMERICAN LAW INSTITUTE Continuing Legal Education Eminent Domain and Land Valuation Litigation January 28-30, 2016 Austin, Texas Pipelines and Energy Corridors: Valuation Perspectives -- Holding Private Condemnors to the Line By David A. Domina Domina Law Group PC LLO Omaha, Nebraska
130 Domina Law Group pc llo www.dominalaw.com 402 493 4100 Pipelines & Energy Corridors: Valuation Perspectives Holding Private Condemnors to the Line David A Domina Omaha NE 1/22/2016 Abstract: When for-profit businesses are authorized to use eminent domain, and do so, their takings should be limited by: 1) the duration of the expected use, with reversionary rights; 2) the duty to indemnify the property owner against all risks and losses except those caused by willful wrongful conduct; 3) exclusive retention of all environmental risks associated with installation, operation, or neglect of the property; 4) a funded responsibility to remove residual improvements when no longer used; 5) prohibitions against sale or change of control without prior governmental approval to assure responsible ownership and operations, and ; 6) an obligation to measure just compensation" as rents, with periodic reviews of amounts, and not to measure the fair market value before and after the initial taking.
131 Domina Law Group pc llo 2425 S 144 th St, Omaha NE 68144 402 493 4100 www.dominalaw.com I. Overview 1. Lawyers with an interest in eminent domain readily recognize the careful, limiting language of US Const Amend V: Nor shall private property be taken for public use, without just compensation. Nebraska, like about 40% of the States, expanded the 5 th Amendment s guarantee at Neb Const Art I, 21: The property of no person shall be taken or damaged for public use without just compensation therefor. 2. Under either Constitutional formula, the core issue upon occurrence of a taking is : What has the owner lost? and not What has the taken gained? Boston Chamber of Commerce v. Boston, 217 US 189, 195 (1910). The owner is to be put in as good a position as he or she would have occupied if the property had not been taken. United States v. Miller, 317 US 369, 373 (1943). 3. The focus of this presentation is on how compensation should be determined, and what limitations on taking authority should be imposed as questions arise when the taking party is a for-profit enterprise engaged in its endeavors at the expense of private property owners who may, as a result of the taking, be put out of an income producing use of their real estate. 4. The argument presented is: When for-profit businesses are authorized to use eminent domain and to do so, their takings should be limited by: 4.1 The duration of the expected use, with reversionary rights; 4.2 The duty to indemnify the property owner against all risks and losses except those caused by willful wrongful conduct; CI4419 Page 1 of 37
132 4.3 Exclusive retention of all environmental risks associated with installation, operation, or neglect of the property; 4.4 An obligation to measure just compensation" as rents, with periodic reviews of amounts, and not to measure the fair market value before and after the initial taking; 4.5 Prohibitions against sale or change of control without prior governmental approval to assure responsible ownership and operations; and, 4.6 A funded responsibility to remove residual improvements when no longer used. II. Special Problems of For-Profit Use of Eminent Domain 5. Litigants before the United States Supreme Court, members of the Court, scholars, and the public have debated, extensively, when it is proper or constitutional for a legislative body to confer the power of eminent domain on a for-profit developer, utility, energy company, etc. Perhaps the more challenging argument for lawyers who must deal with the aftermath of legislation and not its drafting, concerns presentation of admissible evidence and the right to request broad relief that fairly addresses the form of compensation and terms and conditions of use of the property interests taken. This is a particularly acute concern when the taking is for easement rights or less than fee simple. 6. Kelo v City of New London 1 lurks in the background of this paper but is not its topic. 7. Pipelines are used as a peculiar type of enterprise presenting problems, concerns and considerations for legislative action conferring eminent domain authority. Pipelines have been in the news and are of considerable public interest. They are generally massive, intrusive, fraught with perceived operational disadvantages and risks, and concurrently seen as beneficial public utilities. Pipeline cases involve state and federal tension in some contexts. They also 1 545 US 469 (2005). CI4419 Page 2 of 37
133 present issues and concerns about public safety, construction safety, public security, environmental risks, threats and exposures, and debate that often impacts political discourse. 8. Comments in this paper are impacted by the history in Nebraska of the TransCanada Keystone XL Pipeline and controversies before the Nebraska Legislature and judiciary. Nebraska legal activity concerning the KXL pipeline implicated the National Environmental Policy Act, Department of Transportation Safety, Pipeline Construction, Maintenance and Regulations 9. The United States, as a federal government, embarked on preemptive regulation in the area of pipeline safety in 1992, by enacting the Pipeline Safety Act, 49 USC 60101 et seq. 2 Pipeline safety regulations issued under the Act are given effect to assure pipeline design and construction safety. 3 Even drug testing regulations for workers have been upheld under the Act. 4 The regulations under the Act depend on a definition of pipeline. The term is defined by federal regulations. Pipeline or pipeline system means all parts of a pipeline facility through which a hazardous liquid or carbon dioxide moves in transportation, including, but not limited to, the pipe, valves, and other appurtenances connected to line pipe, pumping units, fabricated assemblies associated with pumping units, metering, and delivery stations, and fabricated assemblies therein, and break-out tanks.pipeline facility means new and existing pipe, rights-of-way, and any equipment, facility, or building used in the transportation of hazardous liquids or carbon dioxide. 5 Crude oil pipelines and natural gas pipelines must both comply with federal safety criteria. Natural gas pipelines, which transport a hazardous ultimately usable product must comply with federal siting criteria. There are no such federal siting criteria for crude oil pipelines like the TransCanada Keystone pipeline. 10. A number of judicial decisions have dealt with what is preempted by the Pipeline Safety Act and its regulations. Generally, States are permitted to impose fees on pipeline operators to delay costs of conducting inspections where required to be permitted 2 This Act combined and recodified two previous safety statutes, the Hazardous Liquid Pipeline Safety Act of 1979 and the Natural Gas Pipeline Safety Act of 1968. 3 Skinner v. Mid America Pipeline Co, 490 US 212 (1989) 4 International Broth of Elec Workers Local 1245 v. Skinner, 912 F2d 1454 (9th Cir 1990). 5 49 CFR 195.2. Definitions. CI4419 Page 3 of 37