August 2009 Vol. 236 No. 8

Features

Acquiring Land Rights For Pipelines By Negotiation And Not Condemnation

As utility corridor projects crisscross the nation, more and more land rights will be needed to build them. Even existing corridors may need to be expanded to accommodate anticipated demand.

Unfortunately, in a post-Kelo world, entities that lawfully possess the power to acquire property by the use of eminent domain (including many utilities and pipeline companies) are hesitant to use this power for fear of adverse public reaction.

In Kelo v. City of New London, 545 U.S. 469 (2005), the U.S. Supreme Court held that condemning private property for private redevelopment projects was a proper public purpose under the U.S. Constitution. The unanticipated public backlash over this opinion led many states to enact legislation specifically banning such takings under state law.

But it is not simply the fallout over Kelo that has caused reluctance in the use of the eminent domain power. Over my lengthy career of working with utility providers and other condemning entities, I have yet to meet one that prefers a forced conveyance to a voluntary land acquisition. Eminent domain often means litigation, uncertainty and expense, i.e. the antithesis of a successful corridor project which is defined by the ability to build it on time and on budget.

So how does a company minimize, if not avoid, the use of the eminent domain power in acquiring necessary land rights? Here are several useful tips developed from years of witnessing both successes and mistakes in corridor acquisition and other projects. Each experience leaves important clues.

Hire experienced eminent domain lawyers as early as possible in the corridor-development process. Eminent domain is a specialized area of the law that combines knowledge of specific legal principles with an in-depth understanding of appraisal and valuation standards and techniques. Full-time practitioners of eminent domain law have a reservoir of knowledge that can add tremendous value to any corridor project.

Unfortunately, eminent domain lawyers are often hired at the very end of the acquisition schedule, usually at a critical stage, when efforts to negotiate with recalcitrant landowners have failed, when key parcels have yet to be obtained, and when construction deadlines are fast approaching. By then, the value that such professionals can bring to the process, while still significant, has been diminished from the value that could have been realized if they had been retained at an earlier stage to give strategic advice and counsel aimed at lessening or even eliminating the need to resort to eminent domain.

Sometimes companies feel that hiring eminent domain lawyers early on in the process sends the wrong message, suggesting that litigation is expected or even inevitable. Let me provide a different point of view. I have found that the best deterrent to the use of eminent domain is to have highly qualified and reputable eminent domain lawyers as part of the corridor team from the very beginning of the project. Not only can such individuals offer valuable counsel, but just the knowledge that a company has strong and capable eminent domain expertise on its side can cause opposing parties to think twice about forcing litigation to resolve differences.

Get Legal Professionals Involved

Lawyers that have represented both landowners and condemning agencies offer even greater assurance against the use of the eminent domain power. Such professionals know what motivates both sides, what their respective concerns and desires are, and what it takes to bridge differences, develop workable solutions, and create win/win resolutions that avoid costly and time-consuming litigation.

Make smart corridor-alignment decisions. Too often, the routing of a corridor project is left exclusively to the design engineers. While these professionals are excellent at doing their job of ensuring that the chosen alignment meets all necessary design, engineering, environmental and safety criteria, sometimes less attention is paid to the impacts of the alignment on the lands through which the project passes. As a result, unintentional damages to adjacent lands may be created that might have readily been avoided, even by a slight modification. As the project enters the land-acquisition phase, these impacts can lead to significant compensation claims being made by affected landowners. If these claims cannot be resolved because the parties are too far apart, acquiring the property rights by condemnation may be the only alternative.

Involving eminent domain lawyers in the all-important routing decision can pay dividends later on in mitigating or even eliminating damage claims by landowners. One example of what can occur when this proactive approach is not followed originated in a highway case that went all the way to the state supreme court before it was finally resolved. Although different from a pipeline project, the lesson learned from this example has universal application.

In this case, the highway department made the decision to erect an elevated concrete light rail wall across a narrow strip of a landowner’s commercial property, thereby obstructing all visibility of the property from the adjacent interstate. This action led the owner to make a multimillion-dollar damage claim against the department. Interestingly, during the ensuing litigation, the department admitted that it might have been possible to construct the wall entirely within the public right-of-way, thus avoiding the need to condemn any portion of the owner’s land.

While the department ultimately defeated the owner’s damage claim, success came at a steep price, i.e. several years of intense litigation and significant attorney fees and costs. Although, it is difficult to predict what would have happened if an experienced eminent domain lawyer had been consulted regarding that original alignment decision, the chances are great that the potential damage issue would have been spotted and easily rectified, thereby avoiding the pain and expense of an eminent domain action.

Hire Experienced Right-Of-Way Agents

An equally important countermeasure to the use of eminent domain is to hire experienced right-of-way agents. A right-of-way agent is usually the first face that a landowner sees as the project’s representative. As such, they are in a unique position to act as the project’s good-will ambassadors. This, of course, gives acquisition agents the responsibility to represent the company at its very best. Over the years, I have worked with hundreds of excellent right-of-way agents. I have also worked with those who were less successful at performing their job. The difference often lies in how an agent chooses to interact with a landowner during the critical acquisition process.

I have found the best agents to be those who are always courteous and professional, even under the most difficult circumstances. Being frank and honest about important aspects of the project – whether positive or negative – is also a common trait of good agents. Of course, responding to a landowner’s questions with accurate information in a timely manner is also critically important. Effective right-of-way agents know the project details well and can explain the most technical information to landowners in a way that is understandable without being condescending. Agents that make every effort to get to know the owner’s property, the owner’s uses of his property, and the owner’s concerns about how the project might impact the property, also get high marks.

Remember that most landowners know more about their property than anyone else. As a result, they can sometimes offer useful suggestions on how anticipated impacts from the project can be addressed through construction or by other means. An agent that gives careful consideration to these suggestions, even if they are rejected in the end for good cause, will go a long way in developing a good working relationship with a landowner.

In terms of conducting good-faith negotiations, smart right-of-way agents never threaten condemnation. However, there is a difference between threatening a lawsuit to instill fear in a landowner, and simply making a statement of fact. Agents know that at a certain point in time, if negotiations fail to produce an acceptable resolution, the company may be required to condemn the property. There is nothing wrong in communicating this fact to a landowner at the appropriate time. Such an acknowledgement lets both sides know where they stand.

Pipeline companies have learned from experience that an agent who develops a poor relationship with a landowner, regardless of who is at fault, can set a corridor project back by several months. This is because one landowner who feels mistreated will often share his experience with other landowners, particularly in a small community. When relationships sour and bad feelings result, a negotiated settlement may be impossible to achieve, in which event acquisition by a court order may be the only option left.

Work As A Team

Have all professionals work as a collaborative team, encouraging each to see the “big picture.” From start to finish, corridor projects involve numerous professionals such as design engineers, construction personnel, environmental and land-use consultants, right-of-way agents, lawyers and appraisers. The most successful corridor projects are those where all of these people are working together as part of a team. Unfortunately, it sometimes occurs that work is instead performed on an individual basis, with the experts attending only to those discreet areas of the project that fall precisely within their area of responsibility.

I have learned that collaboration between all professionals involved in the project is the key to avoiding costly mistakes, minimizing delays, and bringing certainty to the project. The highway case mentioned earlier is a perfect example of what can go wrong when professionals operate in isolation at different stages of the project, rather than as a team working toward a common goal and purpose.

Working as a team not only means communication and information-sharing between equals, but encouraging every member of the team to see beyond their specific area of expertise. One of the first things we learn as young drivers is to view the “big picture” from our car and not just the road directly in front of us. Successful corridor projects require a similar 360° view. If those involved in a corridor project work in a vacuum, performing only their assigned task, they will never know whether the actions they take today might adversely impact the actions of people further down the development line.

Every professional should be encouraged to ask this question: “By making this decision am I maintaining or narrowing the options for others who must work on this project after me?” If the answer is that you are narrowing another’s options, then the decision may need rethinking, hopefully with input from the person most likely to be affected by it.

Stay on top of critical time lines. Running out of time is a common element in corridor-acquisition projects. Despite the best planning, every stage of the process seems to take longer than anticipated, particularly when third parties are involved over which the company has no control. With respect to the land-acquisition phase, when construction deadlines are looming and critical parcels have yet to be obtained, settlement discussions with affected landowners are often terminated as the company focuses on the growing possibility of litigation.

However, acquiring property through a court proceeding also takes time. Despite quick-take and immediate-possession statutes in most states, condemning entities need to know that acquisition by condemnation is not instantaneous. Even after the case has been filed, several months may pass before a hearing on the right to condemn can be scheduled, thus further prolonging the possession date. Moreover, in situations involving federal condemnation procedures, still different timing issues may arise.

To avoid the time crunch, it is important that all team members stay on track in terms of moving the project forward. With respect to the land-acquisition phase, maintaining regular contact with landowners, reminding them of their need to respond to outstanding offers, and making sure that all of their questions and concerns are being addressed is of critical importance in keeping a project on schedule. It is also important that landowners know from the very beginning that negotiations will not go on indefinitely.

Be open with the public and disclose as much information as possible about the project. Litigation is often driven by distrust and an inability to understand an opposing party’s position or point of view. With respect to corridor projects, when the general public or affected landowners are left in the dark about the particulars of a project, suspicions arise which are often difficult to allay later on, even through full and frank disclosures.

Successful corridor projects involve the public at the earliest stages, and not simply by including them on a mandated public meeting notice as part of obtaining regulatory and land-use approvals. Community and neighborhood gatherings are perfect ways to disseminate important information about the project, address preliminary concerns, and answer key questions. Remember, the more landowners know, the less they have to fear. And the less likely they are to retain a lawyer out of a sense that their concerns are not being adequately considered or addressed.

Leslie Fields is a partner with Faegre & Benson, LLC, a multi-service law firm with offices in Minneapolis, MN; Denver, CO; Des Moines, IA; and internationally. She has practiced for 26 years in the area of eminent domain law, representing both private landowners and condemning entities, including many pipeline companies, utilities and energy providers. She can be reached at lfields@faegre.com. www.faegre.com