Two Noteworthy Illinois Appellate Cases

Shay Law attorneys were involved in two recent cases on appeal, one decided by the Illinois Supreme Court and the other that is pending before the Illinois Appellate Court, Second District.

A.    In an Opinion issued last fall, the Illinois Supreme Court found an application to the Illinois Commerce Commission (“ICC”) for approval of a proposed new high voltage direct current electric transmission line to be lacking. In Illinois Landowners Alliance, NFP, et al. v. Illinois Commerce Commission, et al., 2017 IL 121302, the Court, in affirming the judgment of the Appellate Court, Third District, held that Rock Island Clean Line, LLC was ineligible for ICC regulatory approval to construct its proposed project and to conduct business as a public utility in this state.  The Court based its holding on its interpretation of the Illinois Public Utilities Act (the “Act”) and, in affirming the Appellate Court, found that Rock Island did not meet the statutory definition of “public utility” (220 ILCS 5/3-105). Specifically, the Court found that Rock Island did not own or control assets in this state as required by the statutory definition. The Court left undisturbed the Appellate Court’s additional finding that Rock Island failed to show that its proposed project would be for a “public use,” an additional requirement under the Act to be classified as a public utility.

Shay Law attorney William Shay and Melissa Schoenbein (formerly with the Firm), along with Michael Reagan of Ottawa, wrote the Supreme Court briefs on behalf of the Illinois Landowners Alliance (“ILA”), a large group of landowners who prevailed in the case.  Mr. Reagan participated in the oral argument before the Court. Shay Law also represented the ILA before the Third District.

B.   The Illinois Appellate Court, Second District, recently heard oral argument and took under advisement an appeal of a decision from the Kane County Circuit Court.  In Muirhead Hui, LLC, et al. v. Forest Preserve District of Kane County, et al., Case No. 2-17-0835, the Plaintiffs filed suit against the Forest Preserve and its attorney for, among other claims, an alleged breach of their fiduciary duties and legal malpractice stemming from the Defendants’ unilateral and unauthorized alteration of deeds to property the Plaintiffs conveyed subject to restrictions that the property be used only for outdoor recreational purposes. After removing the restrictive covenant and re-recording the deeds, without the grantor-Plaintiffs’ knowledge or consent, the Defendants attempted to offer an easement across the property for construction of a high voltage electric transmission line.

The Second District will issue a written decision, which will likely address whether the restrictive covenant gives the Plaintiffs a legally recognized property interest and standing to sue; whether the Forest Preserve, its president, and executive director are protected from liability under the Tort Immunity Act; and whether an attorney owes a non-client a duty of care.

Shay Law attorneys William Shay, John Albers, and Melissa Schoenbein (formerly with the Firm) drafted the appellate briefs on behalf of the Plaintiffs. William Shay argued the case before the Second District on June 13, 2018.

Landowner Ground Leases for Solar Power Projects

As large, proposed land-based solar power projects have become more prevalent in Illinois, many solar power developers have approached landowners interested in entering into long-term ground leases. A ground lease has many important provisions that a landowner should carefully consider.

The financial attractiveness of solar ground leases is clear. Based on the typical structure of a flat rental amount per month, or year, usually with a built-in escalation factor, an acre of farmland will bring significantly more than continued use for growing crops. The landowner also will no longer have the cost and time associated with maintenance of the leased land. The solar company will typically visit the solar site a few times a year to control vegetation and conduct routine maintenance. Compared to wind turbines, a solar array, consisting mainly of panels extending to a height of 8-10 feet, is much less obtrusive, visually and from a noise standpoint.

The length of the lease is determined, in part, by the length of the purchased power agreement with the purchaser of the electric power generated, and by the terms of the project lender.

Along with solar panels, a few other items of equipment and facilities are required. A concrete equipment pad within the leased area, which will contain electrical equipment such as transformers, switches, and inverters, will be located within the leased premises. Poles and an overhead electric line may be required to connect the solar array to the nearest utility interconnection point, providing a path to the larger electrical grid. Additional easement rights will be required for the overhead line, and possibly other equipment, to cross land not part of the leased premises. A gravel road from the nearest public right-of-way to the solar facility also may be required. Typically, the project site will be surrounded by a chain link fence, often with an access path or road surrounding the perimeter inside the fence line

The time between signing a lease and the construction of the solar facility can vary, usually from 1 – 4 years. Solar developers will need permitting from the local county authorities, among others The developer will undertake geotechnical investigations, surveys, environmental reviews, utility interconnect studies and an agreement, surface use agreements, as well as other activities required before a site can be developed.

The solar company should have a plan to remove (decommission) the solar facility when the lease terminates. Because solar equipment is designed to operate for many decades, the residual value of the modules combined with the salvage value of some of the metal and electrical wiring components, means that the overall value of the equipment will likely at least partially offset the cost required for a contractor to remove the equipment. A bond or other form of financial security to insure equipment removal and land restoration may be required by the county, or can be negotiated as part of the ground lease with the landowner.

Other important considerations that the lease should cover include liability, insurance, property taxes, events of and consequences for default, legal fees, rights to assign, sell and transfer, and other factors.

Finding a lawyer with wind or solar energy ground leasing experience will help insure the landowner of fair and reasonable terms for what is likely to be a several decades long contractual relationship and help both parties to efficiently and effectively undertake negotiations to achieve a mutually workable and fair, and legally clear, agreement for the solar energy project.

Shay Law, Ltd. has been retained by many landowners around the State who a solar power developer has approached about a land lease. Our experience in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with solar developers.

The Growth of Illinois' Solar Farms & Lease Considerations

In December of 2016, the State of Illinois dramatically altered the renewable energy landscape by adopting a comprehensive plan designed to substantially increase renewable energy development within its border.  The new legislation, referred to as the Future Energy Jobs Act or Public Act 99-0906, is not perfect, but it is reflective of the significant growth in and greater appreciation for the benefits of renewable energy that have occurred in just the last few years.  Photovoltaic systems, more commonly referred to as “PV systems” or “solar panels,” represent just one of the technologies emphasized in the legislation.  PV systems with a nameplate capacity greater than 2 megawatts (“MW”) are considered utility-scale projects under the new legislation.  Solar projects of this size are also sometimes referred to as solar farms. 

The United States Energy Information Administration (“EIA”) lists only three currently operating solar farms in Illinois.  The 9 MW Exelon Solar Chicago project began operation in Cook County in 2010.  The 2.6 MW Rockford Solar Farm and 20 MW Grand Ridge Solar Farm both began operation in 2012 in Winnebago County and LaSalle County, respectively.  Not reflected on the EIA list is the 4.68 MW University of Illinois Solar Farm in Champaign County, which began operating in 2015.  Under Public Act 99-0906, the number of solar farms in Illinois is expected to grow significantly.

Although Public Act 99-0906 only became effective June 1 of this year, solar farm developers have been contacting Illinois landowners for the past several months as they seek sites for their projects.  Solar farm developers active in Illinois include Borrego Solar Systems, Inc., Community Power Group, Cypress Creek Renewables, E.On, Invenergy LLC, juwi Inc., NextEra Energy Resources, Renewable Energy Systems Ltd., and Wolcott Energy Group.  Many of these developers are often interested in agricultural land for their projects; but rather than purchase land they seek multi-year land lease agreements with landowners.  As with any long-term agreement, it is important to consider the terms of a solar farm land lease before signing.  Careful review of the terms and sensible negotiation between the parties can produce a solar farm land lease that is fair and beneficial to both the developer and landowner.

Parties often focus on monetary terms in an agreement, but that is not the only aspect of a solar farm land lease that warrants serious consideration.  Another significant aspect pertains to restoration of the land when the lease ends.  For land used to cultivate crops, or adjacent to such land, consideration should also be given to how a solar project may affect drainage.  To whom a developer may transfer its rights to develop and operate a solar project warrants attention as well.  Any new owner/operator should have some experience with developing and operating solar projects.  Access to land not used for the solar project and whether a developer will consider dust from farming operations a problem for the solar panels should also be considered.  Other issues that may arise in solar farm land leases include easements related to adjoining land, liability insurance, removal and replacement of fences, exactly which land rights are included (eg: water and/or mineral rights), and division and payment of taxes.  Developers and landowners alike should be aware of these and other issues that may arise in solar farm land leases and contemplate what is important to them.  Whether working on their own or with experienced counsel, developers and landowners should be able to address these issues and come to a reasonable agreement benefiting both parties.

If you have questions concerning solar farms or solar farm leases, feel free to contact us.

Illinois Power Agency Renewable Portfolio Standard Workshops

The Illinois Power Agency (“IPA”) has announced workshops on the implementation of the revised Illinois Renewable Portfolio Standard (“RPS”) contained in the recently enacted Future Energy Jobs Act, Public Act 99-0906.  Interested stakeholders will be able to provide the IPA feedback at the workshops and in response to questions posed by the IPA after the workshops.  Altogether, four days of workshops have been scheduled.  Interested parties are encourage to attend, but due to space limitation the IPA asks that only one representative from interested parties attend in person.  Phone participation will be available at each workshop.  The days of the workshops and discussion topics on each day are set forth below.  More detailed agendas will be released prior to the workshops at dates to be determined.

Initial Forward Procurements

May 10, Chicago (Start time to be determined)

This workshop will focus on the goal of procuring 1,000,000 annual Renewable Energy Credits (“REC”) each from new utility-scale wind and utility-scale/brownfield solar (pursuant to new Section 1-75(c)(1)(G)) of the Illinois Power Agency Act).  The workshop will provide an overview of the proposed structure and terms of the procurements, select contract provisions, and the timeline for conducting the procurements.  The workshop will provide an opportunity for stakeholder input prior to the release of draft contracts, which is anticipated to be in June.

Long-Term Renewable Resources Procurement Plan

May 17, Chicago

Morning: Overview of the Plan

This workshop will provide an overview of the new provisions of the Illinois RPS, and how the IPA will address meeting the RPS goals through the Long-Term Renewable Resources Procurement Plan.  The workshop will cover the development process for the Plan and opportunities for future stakeholder input as that process moves forward.

Afternoon: Adjustable Block Programs

This workshop will focus on the adjustable block programs for new photovoltaic distributed generation systems.  This will include potential approaches for determining block prices, categories, and sizes; application procedures; program terms and conditions; and other issues to be determined.

Solar workshops

May 18, Chicago

Morning: Community Solar

This workshop will focus on community solar projects.  The agenda will include potential approaches for application procedures; program terms and conditions; consumer protections; and other issues to be determined.

Afternoon: Illinois Solar for All Programs

This workshop will focus on potential approaches for how the IPA will implement revisions to Section 1-56 of the Illinois Power Agency Act, creating the Illinois Solar for All program, which provides incentives for low-income consumers and communities through four programs: (1) Low-income Distributed Generation Incentive; (2) Low-income Community Solar Project Initiative; (3) Initiatives for Non-profits and Public Facilities; and (4) Low-Income Community Solar Pilot Projects.  The workshop will also address potential approaches for defining the term “environmental justice community,” best practices for determination of low-income eligibility, opportunities for grassroots education on the Illinois Solar for All programs, and coordination with job training programs.

Programs for Rural Communities                    

May 24, Springfield (Start time to be determined)

This workshop will focus on implementation of the adjustable block program, community solar, and the Illinois Solar for All programs in exurban and rural areas of Illinois, specifically how to address the different housing stock and program opportunities and interest in these areas, and other issues to be determined.

Shay Law, Ltd. is well suited to assist stakeholders navigate the IPA workshops and ensuing proceedings at the Illinois Commerce Commission (“ICC”).  Shareholders William Shay and Jonathan Phillips have practiced before the ICC for years.  Associate John Albers served as an Administrative Law Judge at the ICC for more than 17 years prior to joining Shay Phillips, Ltd.  Mr. Albers’ ICC experience includes presiding over IPA procurement plan dockets (including the 2014 supplemental solar REC procurement) and a variety of other energy related matters. 

Enbridge considering new pipeline in Boone, DeKalb, LaSalle & Livingston counties

As early as February of 2014, Enbridge Energy, Limited Partnership began surveying land for the possible expansion of its pipeline system in Wisconsin and Illinois.  Enbridge now operates Line 61, which runs from Superior, Wisconsin to Flanagan, Illinois.  The survey work is being done as Enbridge contemplates constructing a new pipeline parallel to Line 61.  Impacted Illinois counties include Boone, DeKalb, LaSalle, and Livingston Counties.  In order to construct a new pipeline, it is likely that Enbridge will need new or expanded easements from impacted landowners.  Before construction can begin, however, Enbridge will need approval from the Illinois Commerce Commission.

Several aspects of any such pipeline construction project impact a landowner’s rights.  The initial survey work, route selection, finding of public need by the ICC, and easement negotiation all represent areas where landowners must be aware of their rights and the risk of loss.  For instance, when a pipeline company asks for permission to conduct a preliminary survey, it is advisable to insist on a written agreement and financial compensation before consenting.  While a company may characterize its survey work as non-invasive, past landowners have experienced damage to fences, rutted lanes, holes left from soil borings, and escaped livestock as a result of survey work.  A written agreement prepared by those with experience in handling such matters can protect a landowner’s interests.  Another example where knowledgeable assistance can make a difference pertains to the ICC.  As an administrative agency subject to specific laws and its own unique rules, having the help of someone experienced with ICC proceedings will make navigating the regulatory process easier.  Easement negotiation is also critical in that it includes more than just money.  A variety of other factors should be considered in easement negotiations to successfully protect a landowner’s interests.

In all of these areas, Shay Law, Ltd. can assist developers in obtaining their required certificates and approvals, and assist landowners and others to protect their interests.  Over the years, William Shay has represented energy developers, energy cooperatives, and numerous landowners in negotiations with utilities, as well as in ICC proceedings.  Mr. Shay’s representation of developers, cooperatives, and landowners, and groups of landowners, includes numerous ICC pipeline and electric transmission line dockets.  For example, Shay Law, Ltd. represented a group of landowners in ICC Docket 14-0754, in which Dakota Access, LLC sought approval for the construction of, and route for, a new petroleum pipeline.  In addition, among the attorneys at Shay Law, Ltd. are former ICC administrative law judges John Albers and Jan Von Qualen.  Mr. Albers and Ms. Von Qualen have presided over dockets relating to pipelines, electric transmission lines, natural gas transmission lines, and water distribution lines.  Their experience can provide valuable insight into the ICC decision making process. 

Cypress Creek Renewables Solar PV Continues Farm Land Lease Activity

Cypress Creek Renewables, LLC has continued to solicit leases from Illinois landowners in many areas of Illinois. CCR’s approach is to have the landowner sign a lease and easement agreement that contains a relatively inexpensive “option” through specifying a 6 month diligence period, with a nominal payment to the landowner. This allows CCR both to try to obtain other properties and to conduct engineering and other analyses to determine whether it wishes to proceed to the next step. The agreement then gives CCR a 2nd option through another 18 month diligence period, with a larger though still relatively modest payment to the landowner. These two “option” periods afford CCR opportunities to terminate and walk away from the agreement. The form of agreement also provides other opt-out provisions that soften CCR’s commitment to pay the landowner all the rent and other compensation expected through the term of the lease. The form agreement contains many other provisions that are slanted heavily in CCR’s favor. To date, it appears CCR is resisting any meaningful revisions that the landowner and landowner’s attorney may propose. It should be remembered that CCR does not have eminent domain authority in the State of Illinois and therefore cannot force any landowner to sign any type of agreement. Landowners are advised to obtain advice and negotiating assistance from an attorney experienced in leases and easements with utility and energy project developers.

Shay Law, Ltd. is experienced in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines, which provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with developers like Cypress Creek Renewables.

 

Cypress Creek Renewables in Livingston and Grundy Counties

A California-based developer of large-scale solar power projects has started soliciting interest from farmers and other landowners in at least two Illinois Counties – Grundy and Livingston. Cypress Creek Renewables, LLC has developed large, multi-acre solar power projects in several states in the U.S., and is attempting to extend its reach into Illinois. In order to develop a project, Cypress Creek typically leases 10 - 40 contiguous acres, the flatter the better, for up to 40 years (typically 20 years base term and successive 5 year renewal options). After an initial diligence period, if the site is suitable, Cypress Creek will install a series of photovoltaic panels elevated on structures a few feet above the ground. 

These types of projects take land out of agricultural production until the lease expires and the solar facilities are removed. Cypress Creek is offering to pay a flat amount to the landowner during the initial diligence period, and if it decides to build the project, would pay a flat annual amount per acre, with an annual escalation factor, for the life of the project. The form of land lease Cypress Creek is proposing contains many important terms and conditions, and landowners are advised to consult an attorney experienced with long term land leases and easements for energy projects. 

Shay Law, Ltd. was retained by landowners who Cypress Creek has approached about a land lease, and we are available to represent others as well. Our experience in negotiating leases and easements on the behalf of landowners for wind energy projects, gas and oil pipelines, and electric transmission lines provides us valuable experience in providing quality legal representation to landowners who may wish to negotiate land lease terms, both financial and non-financial, with developers like Cypress Creek Renewables.

Illinois Appellate Court Stops Controversial Rock Island Clean Line Power Line Project

William Shay recently helped achieve a major legal victory on behalf of a large group of landowners, which should stop the construction across their lands of a proposed new high voltage electric transmission line. On August 10, 2016, the Illinois Appellate Court, Third District, reversed an Order of the Illinois Commerce Commission which had authorized Rock Island Clean Line LLC to construct the transmission line in Illinois. The basis of the Appellate Court opinion is that Rock Island does not possess the attributes of a public utility under the Illinois Public Utilities Act, and therefore is ineligible to receive regulatory approval for the line. Our client, the Illinois Landowners Alliance, consists of over 300 individuals with interests in over 100,000 acres of land in Illinois. The ILA, represented by Shay Law, Ltd., intervened and actively participated in Illinois Commerce Commission Docket 12-0560, opposing Rock Island’s application to the ICC for approval of the project.

Rock Island Clean Line Project; Required State Regulatory Approvals

Rock Island is a subsidiary of recently formed and privately owned Clean Line Energy Partners LLC, based in Houston, Texas. Its project, a direct current transmission line, was proposed to run from O’Brien County in northwest Iowa to Grundy County in northeast Illinois, crossing lands of ILA members. Rock Island needs regulatory approval from both the Illinois Commerce Commission and the Iowa Utilities Board in order to construct the project. Regulatory proceedings in Iowa are pending.

Following testimony, hearings, and briefing in the Illinois regulatory proceeding, the Commerce Commission awarded Rock Island a certificate of public convenience and necessity to construct the Illinois portion of the project on November 25, 2014. The ILA appealed, along with the Illinois Farm Bureau and Commonwealth Edison Company. We prevailed on that appeal.

Third District holds that Rock Island lacks required Public Utility status

In its August 10, 2016 opinion, which can be seen here, the Illinois Appellate Court, Third District, reversed the Illinois Commerce Commission. It found that Rock Island did not satisfy the definition of “public utility” under the Illinois Public Utilities Act for two reasons. First, the Court found that Rock Island did not own any utility assets within the state of Illinois. Secondly, the Court found that Rock Island’s planned sales of capacity on the transmission line to electric generators and other parties was to a limited group of eligible users, and therefore was not for public use. As such, Rock Island is not eligible for, and the ICC lacked authority to issue, a certificate for the project. The ILA, Farm Bureau and ComEd argued that other reasons existed for the Commerce Commission’s Order to be reversed, but the Appellate Court declined to address those arguments once it found that Rock Island failed to satisfy the threshold public utility status requirement.

 

Where does Rock Island go from here?

It has the right to request that the Illinois Supreme Court review the Appellate Court’s opinion, by filing a petition for leave to appeal. The Supreme Court’s decision whether to accept such a request is discretionary, and it accepts only a small minority of such petitions. Even if Rock Island files a petition, and even if the Supreme Court grants the petition and agrees to review the Appellate Court decision, Rock Island will still have to convince the Supreme Court, through briefing and oral argument, that the Appellate Court’s decision should be reversed. Rock Island’s opponents who participated in the appeal, including the ILA, would have the right to participate fully in proceedings before the Supreme Court.

Utility Line & Pipeline Easements Damages to the Remainder (Part 3)

Previous discussions (this is the third and final part of a series of blog posts on damages to the remainder) of the damage to the remainder have addressed Illinois courts’ recognition of such and the impact of utility facilities on property that remains after a partial taking for the purpose of constructing utility facilities.  This part will briefly consider how Illinois courts will assess the value of the damage to the remainder; it is not meant to be all encompassing.  The Illinois Supreme Court may have described just compensation for damage to the remainder most simply when it stated that the diminution in value is the difference between the fair market value of the remainder prior to the taking and its fair market value after the taking and improvement.  While this may sound simple, for many landowners this has proven difficult. 

In practice, a landowner should consider his or her parcel as two separate parcels: the easement parcel and the remainder parcel.  The fair cash market value of the remainder parcel will then need to be determined under two different scenarios: (1) the remainder parcel sits next to the easement parcel as it currently exists (before anything has been done with the easement parcel), and (2) the remainder parcel sits next to the easement parcel with the project for which it was taken having been completed.  The difference between the values under the two scenarios represents the damages to the remainder parcel.  To help ascertain the value of the remainder parcel under the two scenarios, a landowner should consider employing more than one professional appraiser in order to establish a range of values.

To determine the competency of a witness to testify to value in a condemnation proceeding, a witness must have some means of forming an intelligent and valid judgment as to value beyond what is presumed to be possessed by members of the general public.  Individuals the Court has found competent to testify about the impact of a pipeline on their land, for example, include lifelong farmers, one of whom had been a drainage commissioner and a president of the local Farm Bureau.  In another example, the Court permitted testimony about the inconvenience to farming caused by transmission line poles and the corresponding expense increases.  The Court noted that the testimony appropriately pertained to what a willing buyer would pay for an operating grain farm that happened to be located next to a transmission line.

The main lesson from past court decisions is that landowners should focus on market valuation of the land and not lost farming income.  Lost income may affect the land’s value, and so is relevant, but lost income must be translated into impacts on the value of the subject property. Attempts to recover damages based on lost income have failed.  To the extent that rental property may be at issue, the Court has consistently found that in eminent domain proceedings involving premises which are owner occupied, evidence of projected or future rental income is too speculative and dependent upon too many contingencies to be safely accepted as evidence of the fair cash market value.  Furthermore, not every factor that brings about a reduction in value represents a recoverable item of damage.  Diminution suffered in common by all lands in the vicinity of an improvement is not compensable.  A landowner must show a direct disturbance peculiar to his or her property.  In addition, in some situations, the public use for which a portion of private property was taken may actually result in a benefit to the remainder of the private property.  Under such circumstances, any benefit accruing to the remainder property may not be set off against the land taken; but it may be taken into consideration as reducing or completely offsetting any damages to the remainder.

Clearly, knowing the proper elements of damage and how to present them makes a significant difference in whether a landowner receives the compensation he or she believes is merited for damages to the remainder of land in a partial taking.

Utility Line & Pipeline Easements Damages to the Remainder (Part 2)

In Part 1, we introduced the Illinois Supreme Court’s overall treatment of damages to the remainder.  In this discussion, damages to the remainder will be considered in the context of utility easements.  Upon application to and approval from the Illinois Commerce Commission (“ICC”), regulated public utilities in Illinois may resort to the courts to acquire property for utility facility construction projects through eminent domain.  Typically, such projects require the acquisition of an easement from landowners so that a major utility facility such as an electric transmission line, water main, natural gas main, or pipeline can be constructed.  If the utility can demonstrate to the ICC that it has made reasonable efforts to acquire the property interest it needs but has failed to negotiate an agreement with any particular landowner, the ICC may authorize the use of eminent domain in circuit court against that landowner.

Utility facilities that arguably have the greatest impact on the remaining portions of the parcels on which they are constructed are electric transmission lines.  This is so because most other utility facilities (mains and pipelines) are buried; when properly installed and maintained, they are deep enough to avoid contact with general surface uses.  The Illinois Supreme Court as well as lower courts have had opportunities to consider the proper elements of damage to land not taken in the context of electric transmission lines in agricultural settings.  In proving damage to property remaining after an eminent domain taking, the Court has explained that the damage must be direct and proximate and not merely what someone may imagine or “feel.”  A jury, the Court adds, has no right to take into consideration any damage which is merely speculative or which is remotely contingent.

Examples of improper elements of damage identified by the Court include the possibility that at some time a wire or other attachment may fall and cause damage, possible injury from fire or lightning, injury to crops from falling towers or tractors colliding with towers, or livestock or machinery being caught in the towers.  Such damages are too speculative in the Court’s opinion.  Similarly, the Court has found that temporary inconsequential interference with the use of property occasioned by the construction of a public improvement is not a proper element of damage to the remainder.  Temporary inconsequential interference could include temporary easements necessary for the construction of the utility facilities.

On the other hand, the Court has found that if weeds or insects come from around the base of towers/poles, there has been a disturbance upon the land.  In other words, if insects and weeds are disseminated, the whole field is affected.  Additionally, if inconvenience results from requiring more time to perform field work, a right of the landowner has been invaded.  Such circumstances, the Court has held, impact the free use of the remainder of a farm for the best purpose for which it is adapted, i.e. farming.  In considering damages to the remainder, the Court has recognized the impact of transmission lines on farm land by acknowledging that crops throughout a field may be lost or diminished by the different methods of cultivation dictated by the presence of transmission lines.

 Interestingly, in a 1930 case the Court held that the unsightliness of towers was not a proper element of damages to the remainder.  In a case decided in 1977, however, the Court described unsightliness as a bona fide element of damage to the value of property in eminent domain suits.  In so holding, the Court found that an electric transmission line may be considered aesthetically distasteful to potential buyers in a residential area.  Noting the reference to a residential area, five years later the Second District Appellate Court concluded that unsightliness is a proper damage element only in a residential setting.  In a 1984 case, the Third District Appellate Court declined to follow the Second District in this regard and held that unsightliness is a proper damage element when considering compensation for agricultural land.

How a landowner can determine the value of the damage to the land not taken will be addressed in the next installment.

Utility Line & Pipeline Easements Damages to the Remainder (Part 1)

John Albers focuses his practice on utility and energy matters at Shay Law, Ltd. He has written a three part series of blog posts discussing damages to the remainder of a property (that is, the part of the property that is not taken for the easement) during eminent domain proceedings involving utility transmission line and pipeline easements. This is the first part.

Well established in American jurisprudence is the principle that private property may not be taken for public use without just compensation.  Typically, a governmental entity, or an entity with government authorization, seeks to take or condemn private property through an eminent domain court proceeding after efforts to negotiate the purchase of the property have failed.  A key sticking point in such negotiations frequently relates to the amount of money offered for the property.  In those situations where less than an entire parcel is to be taken, some landowners want compensation for more than just the property interest condemned.  They also expect to be compensated for the impact that the condemnation has on their property that remains after the condemnation.  The impact on the remaining property is commonly referred to as the “damage to the remainder.” Absent a negotiated agreement, the court in an eminent domain proceeding is to determine the amount of money to which the landowner is entitled.  Both parties in the proceeding – the condemnor and condemnee – may present testimony and evidence.

Those entities seeking to take only a portion of a parcel often maintain that there is no impact or damage to the remainder of the parcel beyond the property interest that is actually taken.  Regardless of the condemnor’s assertions, however, to the extent that there is an impact on the remainder, the Illinois Supreme Court has long recognized that landowners may receive compensation for damages to property interests remaining after other property is taken via eminent domain.  In considering the compensation to which a landowner is entitled, the Illinois Supreme Court has held that the owner is entitled to the amount of money necessary to put him in as good financial condition as he was with the ownership of his property prior to the use of eminent domain.  The Court, however, has also made clear that to recover for damages to land not taken it must appear that there has been some direct disturbance of a right, either public or private, which a person enjoys in connection with his property, and which gives it additional value, and that by reason of such disturbance he has sustained a special damage with respect to his property in excess of that sustained by the public generally.  The disturbance need not be a physical disturbance or direct injury.

In cases involving the condemnation of an easement strip (typically between 50 and 150 feet wide), the Court has identified three elements of damage for a jury to consider: (1) the fair cash market value of the land actually occupied by any structures, (2) the diminishment in the fair cash market value of the land burdened by the easement strip, and (3) the diminishment, if any, of the fair cash market value of the remainder of the parcel outside of the easement strip.  Which party has the burden of proving damages to property impacted by eminent domain, and the value of such damages, depends on whether the property is that which is to be taken or lies outside of the property to be taken.  The Court has held that a condemnor bears the burden of proving the value of the property interests actually taken.  In contrast, the landowner bears the burden of proof in seeking to recover for damage to the remainder.

In the next installment of this discussion of damage to the remainder, such damages in the context of utility easements will be examined.  The third installment will consider how Illinois courts have calculated the value of the damages to the remainder.

Advancing Renewables in the Midwest

John Albers attended the Advancing Renewables in the Midwest conference in Columbia, Missouri on April 11 & 12, 2016. The conference's primary thrust was to identify, display, and promote programs and policies aiming for the increased use of renewable energy resources in the Midwest.

Many rural electric cooperatives and municipal owned utilities were in attendance. We learned how these energy providers are bringing renewable resources into their energy portfolios as well as enjoyed meeting others in the industry.

Recent Shay Law, Ltd. Presentation

The attorneys at Shay Law, Ltd. endeavor to educate both the public and their fellow attorneys about the law. Unsurprisingly, most of our outreach involves areas of practice we focus on. Lately, one of our attorneys has been busy educating fellow lawyers on utility issues.

On March 18, 2016, William M. Shay presented at an Illinois Institute for Continuing Legal Education seminar. The seminar focused on agricultural law issues. Bill's portion of the seminar addressed the negotiation of electric transmission line and pipeline easements.

 

Piercing the Corporate Veil - Part II

In a previous article we examined the doctrine known as piercing the corporate veil. The article concluded by noting that a recent Illinois Appellate Court opinion affirmed the lower court’s decision to allow a claimant (itself a corporation) to pursue collection from the owner and companion company where the claimant was unable to collect from the first corporation itself. Steiner Electric Co. v. Maniscalco and Sackett Systems, Inc., 2016 IL App (1st) 132023.

Steiner Electric Company was a supplier of electrical products. Maniscalco was the sole owner of Delta Equipment Company and Sackett Systems, Inc. Delta sold and serviced batteries and generators. Sackett sold battery storage systems. Steiner sold some generators to Delta but was not paid. After several failed attempts to collect, Steiner sued and obtained a default judgment against Delta. When discovering it could not collect on the judgment because Delta had been dissolved, Steiner sued Maniscalco individually and Sackett. The circuit court pierced the corporate veil and entered judgment in favor of Steiner against Maniscalco and Sackett, jointly and severally. Upon appeal, the Illinois Appellate Court recited the salient facts and then affirmed the judgement. The court reviewed the law in Illinois governing whether a corporation’s veil should be pierced such that its owners, or other parties closely aligned with the corporation, may be held liable for the corporation’s obligations. 

The court on appeal affirmed the circuit’s finding that both Maniscalco and Sackett should be liable for Delta’s debt to Steiner. Several factors influenced the appellate court. Delta had been inadequately capitalized, with no equity capitalization, or unencumbered capital; it had only funds loaned from Maniscalco, and it consistently had negative equity. Delta failed to observe corporate formalities. Despite being required by its bylaws, Delta had no vice president, and had no bona fide officers other than Maniscalco. It failed to document financial transactions, including loans from its owner with no promissory notes. Maniscalco engineered a $600,000 management fee scheme which resulted in the funds going from Maniscalco to Delta to Sackett and then back to Maniscalco. This transaction lacked any documentation and no record of corporate action. The record reflects the transaction’s purpose was income tax avoidance. When Delta was dissolved, corporate action to support its ceasing operations and liquidating was lacking. Delta and Sackett had a joint bank account, which contributed to the court’s finding of a commingling of funds. Another significant factor was that when Delta was dissolved, its list of customers, totaling over 400, and with a value of $200,000, was transferred to a new company run by Maniscalco’s son-in-law for no payment or other consideration to Delta. A related factor found by the court was a failure to maintain an arms-length relationship among related entities and persons.

The appellate court also affirmed the circuit court’s extension of Delta’s liability to Sackett, a separate corporation but co-owned by the same person (Maniscalco). The main factor was that one corporation was merely a dummy or sham for another, such that the two will be treated as one. The management fee of $600,000, running through both corporations, was important evidence supporting this finding. The commingling of funds in a joint bank account was another factor. The appellate court quoted the circuit court’s statement that Maniscalco’s two corporations had a “unity of interest and ownership that the separate personalities of the corporation and the parties who compose it no longer exist.”

Lastly, the appellate court affirmed a finding that adherence to the fiction of a separate corporation, and not allowing piercing of the veil in this case, would promote injustice or perpetuate a fraud or deception. The court found it significant that Maniscalco closed Delta in response to Steiner’s attempts to collect what it was owed, and his stripping of Delta’s assets, leaving nothing for Steiner to obtain. In conclusion, the appellate court held that the circuit court’s decision to pierce the corporate veil and hold Maniscalco and Sackett liable for the judgement against Delta was not against the manifest weight of the evidence. 

Crowdfunding Rules Set to Kick In

Crowdfunding sites like Kickstarter have become popular for technology and other business start-ups to raise funding from individuals. The funding has been in the form of donations, typically where the donor receives an item, such as a sample product or other item, in exchange for the donation. But starting May 15, new SEC regulations become effective that permit non-traditional investors to invest in, and not just donate to, start-ups. Members of the general public will be able to an equity ownership or other financial interest in a company through a crowdfunding portal. Companies that utilize the new rules must comply with specified disclosure requirements, and may raise no more than $1 million in investments during a 12-month period. 

The rules also limit the amount an individual may invest, measured over a 12-month period in the aggregate for all crowdfunding investments. Two classes of investors are created for determining the investment limit. Class One investors are those who have an annual income or net worth under $100,000. They may invest the greater of (1) five percent of their income or net worth, whichever is less, or (2) $2,000. Individuals with an annual income and net worth that are each equal to or greater than $100,000 are Class Two investors. They may invest the lesser of (1) ten percent of their annual income or net worth, whichever is less, or (2) $100,000. 

All crowdfunding offerings and investing must be done on line through registered intermediaries, either a funding portal or broker. Intermediaries must keep detailed records of offeror disclosures and transactions. Companies utilizing the new regulations may offer common stock, preferred stock, other equity ownership, or debt. The regulations mandate certain specific types of disclosures, which the intermediary must maintain and make available to prospective investors. These disclosures include: (a) the name of each officer, director, and 20% or greater owner, and number of employees; (b) the issuer’s business plan; (c) description of issuer’s financial condition and selected financial data for previous two years; (d) purpose of the offering and intended use of proceeds; (e) targeted amount to be raised, the expected date to reach that amount, and regular progress reports, as well as the maximum amount that will be accepted; (f) the price of the securities being offered and how the price was established; (g) description of issuer’s ownership and capital structure; and (h) description of risk factors. The issuer may not advertise the crowdfunding offering other than providing notice that direct investors to the portal or broker.

Piercing the Corporate Veil in Illinois

Greta Jones contracts with Malovan, Inc. to provide equipment and services. Malovan is owned by Mark McDonald, its sole shareholder. Jones fully performs her obligations and submits an invoice to Malovan. After numerous unsuccessful attempts to collect, Jones sues both Malovan and McDonald. Can Jones obtain a judgment against McDonald? Under prevailing Illinois law, McDonald is shielded from liability for debts of his corporation. A corporation is a legal entity separate and distinct from its shareholder, directors and officers. One of the benefits of forming a legal entity such as a corporation is to protect the owners, directors and officers of the corporation from having their individual assets exposed to a party who has a claim against the corporation. But exceptions exist.

Under the doctrine, piercing the corporate veil, a person may hold others liable for debts and liabilities of a corporation. The issue becomes significant, for example, when the claimant is unable to collect on a judgment against the corporation, because the corporation has insufficient assets to satisfy the judgment.

Illinois courts have addressed various circumstances and decided when the corporate veil may be pierced. A corporation may be organized and controlled by another such that maintaining the fiction of separate identities would result in a fraud or promote injustice. Courts have imposed liability on owners, separate from the corporation, when the court finds a unity of interest and ownership so that the separate identities no longer exist; and that preserving the separateness of the corporation would promote injustice.

In finding a unity of interest and ownership, courts have considered the following factors: (1) inadequate capitalization; (2) failure to issue stock; (3) failure to observe corporate formalities; (4) nonpayment of dividends; (5) insolvency of the corporation; (6) directors and officers are nominal and nonfunctioning; (7) absence of corporate records; (8) commingling of corporate and personal funds; (9) diversion of corporate assets to an owner or other person to the detriment of creditors; (10) failure to maintain an arms-length relationship among related entities and persons; (11) whether the corporation is a mere façade for the operation of dominant owners.

It is rare that a corporate veil will be pierced; the separate identities of the corporation and its owners, directors and officers is normally upheld, such that the individuals may not be held liable for the corporation’s debts and liabilities. In a recent decision, however, the Illinois Appellate Court affirmed the lower court’s decision to allow a claimant (itself a corporation) to pursue collection from the owner and companion company where the claimant was unable to collect from the corporation itself. Steiner Electric Co. v. Maniscalco and Sackett Systems, Inc., 2016 IL App (1st) 132023. A subsequent blog entry will describe the decision in Steiner.

New ATC Transmission Line

American Transmission Co. recently unveiled a proposed high voltage transmission line project. ATC proposes a three to five mile long transmission line between Wadsworth, Illinois and Pleasant Prairie Wisconsin. This 345,000 volt transmission line will cost approximately $52 million to $63 million. ATC's website for the Wisconsin-Illinois Reliability Project displays maps of potential routes for the project.

ATC previously built a similar transmission line between Kenosha County Wisconsin and the Zion Energy Center in Lake County, Illinois. ATC believes that market conditions are causing congestion in the Wisconsin-Illinois electrical interface. It proposes this project to resolve that congestion.

The Milwaukee Wisconsin Journal Sentinel reports that ATC will be hosting a community meeting in March 2016 and expects to file an application with the Illinois Commerce Commission in June 2016.

 

New Wind farm in Chenoa, Yates, Lawndale, & Lexington - McLean County

The Pantagraph reports that Invenergy is developing a wind energy project in McLean County. The project is expected to consist of 120 turbines in Chenoa, Yates, Lawndale, and Lexington townships.

Invenergy is an energy company out of Chicago. It has already begun approaching landowners in northeastern McLean County. We are unaware of the extent of their outreach efforts at this time. However, the Pantagraph reports that it is working on community outreach. Before it can build the project Invenergy will be submitting materials to the McLean County Board and Board of Zoning Appeals.

Wind turbine easements are complicated agreements. Issues of compensation and protecting landowner property (typically farm ground) abound. While Invenergy will have to negotiate and submit to an Agricultural Impact Mitigation Agreement, that one-size-fits-all document might not work for all landowners.

Shay Law, Ltd. has a thriving utility and energy practice. We regularly assist landowners in negotiations with wind energy developers. We also can assist landowners that wish to oppose the project. 

If you are affected by this Invenergy project in Lexington, Lawndale, Yates, or Chenoa townships, feel free to call our office. We can arrange a consultation to discuss your options and the best path moving forward.

Walnut Ridge Wind Farm Bureau County

Bureau County Illinois recently approved the Geronimo Energy (BHE Renewables) Walnut Ridge Wind Farm. It covers 14,000 acres, including portions of of Ohio, Walnut, Greenville, Manlius and Bureau. Though the Zoning Board of Appeals for Bureau County denied the entirety of the project, the Bureau County Board approved the majority of the project in early January 2016.

Though construction is not yet underway, over 70 landowners along the ridge running from Mendota through Princeton, Illinois will be impacted with a turbine on or near their farmland. There are many factors to consider when agreeing to placement of a wind turbine, or other infrastructure, on your land. These include approval of conditional use permits, decommissioning and site restoration, a substation, staging area, power poles and transmission lines, there are many factors to consider when agreeing to have a wind farm structure on your land.

Shay Law, Ltd. has worked with many landowners regarding easement negotiations for wind turbines. We look forward to helping landowners facing impacts from the Walnut Ridge Wind farm. If you have questions regarding this project, contact us to discuss your options.

NuStar proposes pipeline from Shelbyville to Decatur

NuStar Pipeline filed a petition with the Illinois Commerce Commission for approval of a new ammonia pipeline. NuStar calls this pipeline the Decatur Lateral. As described in ICC Docket 15-0646, the project consists of a 44-mile long, 6” diameter pipeline running from southwest of Shelbyville to Decatur. According to its ICC filing (which can be found here), NuStar has already begun approaching affected landowners to negotiate easements for the pipeline. Many have already been contacted by right-of-way representatives. Some have already been presented with option and easement agreements.

We are reaching out to affected property owners along the proposed route. We regularly represent landowners in intervening before the ICC to challenge proposed routes, to persuade the ICC that projects are not needed and should not be approved, or to raise other issues. We also regularly assist landowners in negotiating easements with utility companies and pipelines, represent landowners in eminent domain related proceedings before the ICC, and represent landowners in condemnation proceedings in Illinois courts. We have the experience needed to help landowners achieve fair compensation and other important easement terms.

Shay Law, Ltd. is well versed in pipeline matters. We can help landowners negotiate the compensation and other terms. Or we can also intervene on their behalf at the Commerce Commission.