Friday, October 16, 2015 at 6:36PM
Clark Hill

I am actively representing and am regularly contacted by owners confronted by pipeline takings.  Currently, there are multiple companies pursuing new pipelines in southeastern Michigan including Rover Pipeline, Nexus, DTE and Wolverine Pipe Line.  This post is an introduction to pipeline issues that links to other, longer posts addressing specific issues. 

Some property owners are outraged at the prospect of granting (or being forced to grant) an easement to a pipeline company.  Some owners acknowledge that acquisition of certain rights are reasonable but find the proposed acquisition by the pipeline company to be excessive.  These owners want to know what can be done to stop or limit the taking.  In some instances, owners can challenge the rights being acquired.  This post describes this legal issue, including an example involving a pipeline case that I handled on behalf of the owner.

Owners are often scared to hire a lawyer, fearing the costs that would be associated by such a retention.  This post describes a number of benefits that owners enjoy.  The last two items, which discuss reimbursement of the standard contingent fee that I charge to represent owners and payment of the owners’ appraisal costs, are most relevant in a pipeline taking, which will most likely involve imposition of an easement.  It is critical for owners to realize that my fee is based on obtaining an increase in just compensation over and above the agency’s good faith offer.  I charge 1/3 of the increased compensation.  I do not take a percentage of the agency’s good faith offer.  If I do not benefit you by increasing your compensation above the good faith offer, I do not earn an attorney fee.

This post describes the procedures surrounding the issuance of a good faith offer, which is a prerequisite to initiating a condemnation lawsuit and is the basis for calculating the contingent attorney fee that I charge.

The basic rule for compensation involving easements is summarized in this standard jury instruction.

A case involving acquisition of an easement is called a partial taking.  The property rights retained by the owner are called the remainder.  Michigan’s jury instruction relating to partial takings summarizes some of the key issues raised in partial taking cases:

This case involves what is known as a “partial taking”; that is to say, the property being acquired by the condemning authority is part of a larger parcel under the control of the owner.

When only part of a larger parcel is taken, as is the case here, the owner is entitled to recover not only for the property taken, but also for any loss in the value to his or her remaining property.

The measure of compensation is the difference between (1) the market value of the entire parcel before the taking and (2) the market value of what is left of the parcel after the taking.

In valuing the property that is left after the taking, you should take into account various factors, which may include: (1) its reduced size, (2) its altered shape, (3) reduced access, (4) any change in utility or desirability of what is left after the taking, (5) the effect of the applicable zoning ordinances on the remaining property, and (6) the use which the condemning authority intends to make of the property it is acquiring and the effect of that use upon the owner’s remaining property.

Further, in valuing what is left after the taking, you must assume that the condemning authority will use its newly acquired property rights to the full extent allowed by the law.

The bolded language is critical to understanding the just compensation issues arising from a partial taking.  A post that I wrote describing a court ruling that I obtained against ITC, an electric transmission line company, enforcing this rule of law can be found here.  A more detailed article that I wrote for the International Right of Way Association Magazine can be found here. This is critically important when dealing with pipeline companies.  For example, Rover Pipeline landmen are telling owners that Rover does not intend to construct anything above the ground other than pipeline markers.  However, Rover’s easements allow them to build any type of above ground improvement that they desire in the easement area.  Rover’s standard easement also allows them to use any portion of the owner’s property to gain access to their electrical corridor.  However, they do not take that right into account in their good faith offers.

Owners are often concerned about the potential dangers of natural gas pipelines, particularly if located close to their homes.  There have been many incidents of pipelines exploding around the country.  To the extent that the market recognizes a danger that impacts market value, the resultant reduction in value is compensable.  This post discusses the issue in detail.

This blog post discusses the use of herbicides in utility corridors without provision of notice to property owners.  This issue commonly arises in transmission line cases.  Since pipelines depend on aerial surveillance, it is an issue that must also be explored in pipeline cases.

An owner with multiple properties that might be impacted by a taking is entitled to just compensation for all of them, even if an easement is imposed against only one property.  Examples include reduction of access to one property impacting a neighboring property or disturbance of farming drainage tiles that service multiple fields.  A detailed blog post can be found here.

Finally, this article that I co-authored with a number of appraisal specialists summarizes just compensation issues that may arise.

This post is premised upon state law applying.  Rover has asserted that it may file condemnations in federal court.  However, my research indicates that even if those cases are filed in federal court, the state laws described in this post should apply.

I hope that this post summarizing key issues and pointing to more detailed discussions is helpful.  Please do not hesitate to contact me if you have been approached by a pipeline company.

Article originally appeared on Clark Hill Property Owner Condemnation Services (http://michigancondemnationblog.com/).
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