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Dec '23

Transmission Lines and Eminent Domain: What Property Owners … – JD Supra

One of the most common types of cases we handle is utility takings for transmission lines.  As governments attempt to improve the electrical grid to support the transportation of wind and solar energy, this type of case is likely to become increasingly common.  Although transmission lines may serve a public purpose, they often devastate properties, which are clear-cut and subjected to the invasive humming and hissing of hundred-foot-high transmission lines.
Our firm has recently received many phone calls and emails from property owners about the International Transmission Company’s (ITC) $850,000,000 project across Calhoun, Branch, Eaton, Clinton, Gratiot, and Ionia Counties (specifically, U-21471, which goes from ITC Oneida Substation to Nelson Road Substation and U-21472, which goes from ITC Helix Substation to Hipple Substation).  The project will place several hundred property owners—primarily engaged in agriculture—in the difficult position of potentially losing control of all or part of their land.  We have also received several inquiries from residents in Roscommon County, where Consumers Energy plans on placing high-voltage transmission lines on residential properties.
Because of how common these cases are becoming, I thought it was worth providing property owners with a helpful guide.
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Here is a general breakdown of what to expect once a utility company decides to route a transmission line through your property:
At an early stage, utility companies compare routes for transmission lines and decide where to place them based on several factors, such as minimizing costs and environmental impact.
Once the utility company selects a route, it sends representatives—who sometimes work for other entities but acquire the property on behalf of the utility company—to negotiate with property owners to acquire easements for transmission lines.  (Easements are legal agreements that give the easement holder—in this case, the utility company—the right to use land for a specific purpose.)  For the ongoing cases with ITC and Consumers, the easements will likely grant the utility company the right to clear-cut all vegetation, install a transmission line, and restrict specific types of property usage that may interfere with the transmission line.
We have heard stories about third-party purchasers (who acquire property on behalf of utility companies) misleading owners.  For example, some people have told us that the third parties informed them that they have no recourse and must grant the easement.  In other cases, the acquiring entities offer a “one-time” or “voluntary” bonus with an expiration period.
Results vary, but our clients almost always receive far more compensation than they are offered at this stage.  It is also easier for utility companies to proceed with a particular route or project when several property owners along the proposed route voluntarily acquiesce.  We highly recommend consulting with an eminent domain specialist before giving away any of your property rights.
If property owners do not voluntarily acquiesce to the utility company, the utility company has to sue the owner to acquire the property via eminent domain.
There are several statutory prerequisites to filing an eminent domain lawsuit.  One is that the utility company must obtain an appraisal of the damage caused to the property.  The utility owner then must provide the property owner a “good faith written offer” to acquire the property for at least the amount established by the appraisal report.
In most utility taking cases, the utility company needs only part of the owner’s property for the transmission line.  We call that a “partial taking.”  In partial taking cases, the property owner’s compensation is usually calculated as the difference between the property’s value before and after the taking.
In our experience, the utility company’s appraisers frequently underestimate the damage to the property’s value.  Most of the time, they do so by estimating the damage using a percentage of the value of the easement area.  For example, they will find that the taking diminishes the value of the land within the easement area by 50%.
The problem with this approach is that partial takings often affect the value of the entire parcel, not just the easement area.
As an illustration, an invasive easement that allows a utility company to install a high-voltage transmission line across a field impacts the dimensions of the remaining land and the owners’ ability to farm it.  The damage goes far beyond just the value of the strip taken for the transmission line.
In the residential context, an easement that enables the utility company to clear-cut all trees and landscaping and install a hideous high-voltage transmission line affects the aesthetics and value of the entire property, not just the value of the land in the easement area.
Finally, if the utility company cannot resolve its case with you, it will need to file an eminent domain lawsuit.
The structure of these lawsuits is somewhat unique.  (Please note that this varies by state.)  The utility company files the lawsuit, which makes them the “plaintiff” and the landowner the “defendant.”  But unlike most cases, the plaintiff pays the defendant.
Michigan’s eminent domain cases typically proceed in two stages:
In the first stage, the utility company files the lawsuit, and the property owner can challenge the taking for many reasons.  I describe grounds for challenging the lawsuit in more detail below, but they range from the utility company lacking the authority to condemn the property to the taking not being necessary for a public use.  If the property owner succeeds and the court dismisses the eminent domain lawsuit, the utility company is generally responsible for reimbursing the property owner for its reasonable attorney fees.
If the property owner does not challenge or unsuccessfully challenges the taking, the utility company pays the property owner the amount from its good faith written offer and the court grants it the easement.  Because the utility company has the easement, it has the legal right to move forward with its project, but that does not fully resolve the case.
In the second stage, the parties litigate the compensation the utility company must pay the property owner.  Both sides typically hire an expert to prepare an appraisal report and go through a discovery process during which those experts (and potentially other parties, including the property owners) are deposed.  If the parties cannot settle the case, a jury decides the compensation amount.
Please note that having an experienced eminent domain attorney throughout this process is extremely important.
One of the most common questions property owners ask is whether and how they can challenge a utility company’s taking of their property.
Our law firm—and my dad in particular—is known nationally for challenging takings.  In my dad’s most well-known case, County of Wayne v. Hathcock, he convinced the Michigan Supreme Court to narrow its definition of “public use” for which a government-authorized entity may condemn private property.  Before that case, acquiring entities could seize land from private owners and give it to privately owned corporations based on the sole justification that the project indirectly benefits the public through economic growth.
With that as an introduction, here is a brief description of the main challenges property owners can assert against condemning entities:
The Constitutions of Michigan and the United States allow government-authorized entities to condemn property for “public use.”  As explained above, my dad was at the forefront of narrowing the scope of a “public use” for which the government may condemn property.  Utility infrastructure projects, however, usually constitute public uses for which eminent domain is available.
Another more applicable ground for challenging the taking is “necessity.”  In other words, you can challenge whether the seized property (here, an easement) is necessary for public use.
Several property owners have reached out about challenging a proposed route.  Sorry for getting technical, but I think that is necessary given the number of inquiries (and the emotions at stake in this determination).  Under Michigan law, the standard courts consider is whether the proposed route is “reasonably suitable and necessary for the contemplated project” and “whether the condemning agency needs to take this particular property.”  City of Troy v. Barnard, 183 Mich. App. 565, 569 (1990).  Utility companies generally do not need to prove that the “proposed plan is the best or only alternative.”  Instead, the utility company must show “only that [the proposed plan] is a reasonable one.”  City of Novi v. Robert Adell Children’s Funded Tr., 473 Mich. 242, 254 (2005).
Challenging a proposed route is an uphill battle:  It is difficult to show that a proposed route is not “a reasonable one.”  Utility companies consider many factors when selecting where to place transmission lines, including cost, long-term regional planning, environmental factors, and avoiding public land.  Those factors give them leeway when explaining that a proposed route is not unreasonable.
By contrast, we have had far more success challenging the specific taking (as opposed to the general route) based on its “necessity.”  In our opinion, utility companies often seek easements that grant them more rights than necessary for infrastructure projects.  For example, some easements grant utility companies the right to use the rest of the owners’ property (i.e., the land outside the easement area) whenever convenient.  We often challenge the scope of the taken property, including the easement terms.
Feel free to read another one of my recent blogs for more information on how we challenge the terms of an easement and why we ask for compensation based on the utility company’s maximum possible use of the easement, even where that use is theoretical or unlikely.
When property owners voluntarily agree to an easement at an early stage, they often agree to an easement that is far more intrusive than necessary.  Property owners often ask us what they can do when a utility company expands its use under an existing easement.  Unfortunately, we often can’t do anything about it because the utility company acquired the right through an overly expansive easement many years earlier.  Once again, we highly recommend consulting an attorney before granting a utility company an easement.
Utility companies need to have the statutory authority and jurisdiction to condemn property.  In most cases, the utility company has statutory authority.  Jurisdiction comes into play at times when the utility does not adhere to the necessary process, such as providing a good faith written offer to the property owner before filing suit.
Finally, utility companies often consider several possible routes and can be influenced to varying degrees in where they ultimately locate transmission lines.
Before filing a lawsuit, utility companies often apply to the Michigan Public Service Commission (“MPSC”) for approval.  The MPSC reviews the application, considers written comments, holds public hearings, and issues decisions.  Courts are typically extremely deferential to MPSC decisions, so it is often the best forum for challenges.  More information on the MPSC and opportunities to participate are available here.
One common misconception is that it is expensive to hire a condemnation lawyer and will not help you.
Fortunately, that is not the case.  Michigan’s laws—many of which my dad helped promulgate—are generous in protecting property owners in eminent domain cases.  Michigan law (MCL 213.66(3)) specifies that utility companies “shall” reimburse property owners for “reasonable” attorney fees that do not exceed 1/3 of the amount by which the ultimate compensation award exceeds the agency’s written offer.  The standard practice in our industry is to incorporate that standard in fee agreements.  If our clients do not get more compensation after hiring us, they do not pay us a dime.  And if they get an increase in compensation, the utility company is generally required to reimburse it.
A property owner’s worst nightmare is to have their property taken away.  If you are put in that awful position, know that you have rights.  Hire an attorney and explore challenging the taking as unnecessary for a public use.  If there is no viable challenge to the taking, fight for as much compensation as possible, knowing that the entity doing the condemnation is responsible for reimbursing you for your reasonable attorney fees.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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Joker
Joker

Joker has been buying and selling domains since the late 90's. He has worked with many portfolios and investors over the past decade as well.

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