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.

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.

 

Ameren Spoon River Transmission Line

Earlier this year, the Illinois Commerce Commission entered an Order authorizing Ameren Transmission Company of Illinois to build a 345 kV transmission line between Galesburg and Peoria, Illinois. Shay Law, Ltd. intervened on behalf of landowners along Ameren's preferred route for building the project. Its attorneys were able to persuade the Illinois Commerce Commission to have the line built on an entirely different route, a rare and quite successful result. While results can never be guaranteed, Shay Law, Ltd.'s success in altering the proposed routing of this particular transmission line is an example of our highly-effective, landowner focused, practice in utility law.

Now, Ameren is sending letters to landowners along the route approved by the Illinois Commerce Commission. Shay Law, Ltd. has helped dozens of landowners in easement negotiations with utility companies. Our holistic approach does not just seek to maximize your compensation. We also negotiate that the terms of easements are fair, reasonable, and agreeable to our clients.

Anyone who has received a letter from Ameren Transmission Company of Illinois should call us for a free consultation. We are offering reasonably priced, in some cases flat-rate, representation for easement negotiations with Ameren.