Two New Powerline Projects Make Eminent-Domain Use in Frisco a Real Possibility

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Lattice overhead powerlines. Photo courtesy of WikiMedia Commons.

The Public Utility Commission of Texas (PUCT) recently approved the Final Order for a Brazos Electric Power Cooperative powerline project. The project will run along the west side of FM 423, covering an area from Lebanon Road to Witt Road. It will be a hybrid construction, combining overhead and underground lines, and mixing transmission lines with distribution lines. Transmission lines, typically larger, carry a higher voltage than distribution lines, and are used to connect substations with their respective generation plants. Distribution lines are used to provide electricity directly to homes or businesses, and therefore carry a lower voltage. With the passage of the Final Order, Brazos Electric will likely soon begin construction preparations. This includes acquiring easements from property owners along the powerline’s route.

Meanwhile, CoServ, a Brazos Electric member, has submitted a proposal for the Kittyhawk project, which would place transmission lines along State Highway (SH) 121. The project would require land in Frisco, McKinney, Allen, and Plano, and is still under review in those cities. So far, the response has been mixed. In a June resolution, McKinney’s City Council opposed the location of a substation within McKinney’s city limits. Shortly after, a Plano City Council resolution endorsed the council’s preferred route option. The Frisco City Council has yet to pass a resolution on the project, though it’s Chamber of Commerce Director, Shona Huffman, suggested that the chamber would prefer the shortest and most cost-effective route.

“For Kittyhawk, since there are routes that are cheaper and less invasive to development and residents and businesses, those are the routes that we would prefer,” she said. “We’re researching to see what involvement, if any, we’ll have.”

For both these projects, it is highly unlikely that the compensation offered will be just and adequate as required by the Texas Constitution. For example, the taking of powerline easements after causes damages to the remaining property. Before accepting an offer, landowners should carefully review the offer and consult with their lawyer before reaching an agreement with the powerline company

TxDOT Approves $70.2 Billion Spending Plan

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Commuter traffic on I-35. Photo courtesy of WatchDog.org.

The Texas Transportation Commission (TTC) recently approved a $70.2 billion spending plan to fund various projects over the next ten years. Though the funds have yet to be designated in their totality, the Commission has set a goal of allocating $38.3 billion, or about half the funds, to specific projects within the next few months. The funds have been assembled from various tax sources. Proposition 7, an amendment to the Texas Constitution approved last November, is responsible for about $21.8 billion, and works by redirecting at least $2.5 billion a year in sales taxes from vehicle sales to TxDOT. Proposition 1, another constitutional change, is expected to account for $6.3 billion over the course of the next decade, and has already provided over $2 billion since taking effect. Finally, $10.2 billion in revenue is expected to come from increases in federal payments, and the elimination of diversions, which re-allocate budgeted funds to other agencies.

Austin District officials suggest that disbursements affecting the District may take the following forms:

  • $4.3 billion to overhaul I-35;
  • $2.6 billion for congestion relief on I-35, U.S. 183, and Loop 360 or RM 620;
  • A portion of $6.4 billion allocated for bridge and safety projects;
  • $1 billion to improve metropolitan mobility; and
  • A portion of $10 billion allocated for strategic property development.

High Speed Rail Number Two

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A Chinese bullet train on its way to the Pearl River delta. Photo courtesy of DallasMorningNews.com

The Texas Department of Transportation (TxDOT) announced that it is considering the development of a high-speed rail line. The rail line would be the second such project proposed recently, the other being the frequently discussed Dallas to Houston high-speed rail under development by Texas Central Partners, a private firm. The TxDOT train would travel over an 850 mile route, connecting Oklahoma City and the Rio Grande Valley. Though the exact placement of each station has yet to be fully determined, TxDOT has already released a preliminary map with several proposed points. The project would run along Interstate 35, and would assist TxDOT’s ongoing objective to reduce traffic.

“I travel back between Austin and San Antonio a lot, and sometimes it takes three hours and sometimes it takes five hours depending on the traffic,” said Mark Werner, the rail planning director at TxDOT. “It’s just reliability and to provide people another option to travel.”

So far, TxDOT has yet to propose solutions to address the cost and timeline components of such an undertaking. TxDOT is still investigating the feasibility of the project, and is expected to present its findings to the Federal Railroad Administration by the end of the year. If this project receives the green light, it is likely the state would use its powers of eminent domain to acquire private property along the route.

How the Badgers can “Hook the Horns” and Gig the Aggies

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Photo Courtesy of TheSportsBank.net

Typically, Wisconsin happenings impact Texas most greatly in the area of football. However, a recent Wisconsin legal development, now before the Supreme Court, may well have implications for Texas landowners in the area of regulatory takings. Regulatory takings occur when a government regulation limits the potential uses of a property to such a degree that the property is effectively stripped of all economic value. In Joseph P. Murr et al v. Wisconsin, et al., the Murrs, siblings Joseph, Michael, Donna, and Peggy, argued that by prohibiting certain transactions, particular Wisconsin land ordinances had so deprived their property of value that a regulatory taking been inflicted.

In 1960, the Murr’s parents purchased Lot F and constructed a cabin on it. They purchased the adjacent Lot E three years later as an investment for development or sale. Lot E remains undeveloped to this day. In 1994, the Murr’s parents transferred ownership of Lot F to the siblings, followed by Lot E in 1995. As the parcels were adjacent, less than one acre in size, respectively, and now under common ownership, the title transfer triggered a St. Croix County land ordinance which merged the two lots. The same Ordinance also prohibits the sale or individual development of adjacent lots under common ownership unless an individual lot has an area of at least one acre. Several years later, the Murrs attempted to sell Lot E, and sought a variance to use or sell their lots separately. The Department of Natural Resources and county zoning administrators challenged the application, which was formally denied by the St. Croix County Board of Adjustment. The Murrs sought review and the trial court affirmed the Board’s decision. On appeal, the Wisconsin Court of Appeals affirmed the lower court’s decision.

The Murrs then brought action against the State and County, alleging that the Ordinance caused an uncompensated regulatory taking of their property. They argued that by restricting any sale of the parcels to a combination of the parcels only, the Ordinance deprived the Murrs of any value that Lot E might have possessed as an individual parcel. The Court determined that the effect of the Ordinance must be examined on the Murr’s property as a whole. The Court held that taken as a whole, the land still retained significant value even under the Ordinance, and that therefore, the Murrs did not suffer a compensable taking as a matter of law, which the Wisconsin Court of Appeals affirmed. The Supreme Court of Wisconsin declined to hear the Murr’s appeal of the Appellate Court’s decision.

The case has since then been granted review by the United States Supreme Court, and may have a direct impact on Texas landowners who have been denied use of their property by a City or County Ordinance.

“Developers face entitlement woes as self-storage projects rise.”

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LEED Certified Storage Facility. Image Courtesy of SelfStorage.com.

Depending on local regulations, a landowner may need to secure real-estate entitlements before being allowed to develop land. Such entitlements can be difficult to obtain, as the law surrounding them is often dense and complex. In the area of self-storage facility construction, the sheer variety of local regulations can sometimes impose additional administrative costs and thus damage the profit potential of a new development. In this article by Kerry Curry for SpareFoot.com, Justin Hodge, a Partner at Johns Marrs Ellis & Hodge LLP provides commentary on the barriers facing landowners seeking entitlements.

To read Ms. Curry’s article, click here.

Mitigation Credits as “Highest and Best Use”

 

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Mitigation Bank Swampland in King County WA. Photo Courtesy of King County WA.

In Eminent Domain cases, the acquiring entity or condemnor, must compensate the landowner for the property they are taking. Fulfilling this requirement typically raises two questions:

             1) How much should the landowner receive for their land?

             2) How should we determine that amount?

Under Texas law, a landowner is entitled to compensation for an amount to be determined by an application of the “Highest and Best Use” (HBU) principle. The principle requires that the value of the land be established, not merely by evaluating the current use, but by analyzing four factors. Thus, a landowner may receive an amount derived from a potential highest and best use, rather than the current one. Therefore, an application of the HBU principle must operate within the boundaries established by these four limiting conditions. The purported HBU must be:

             1) Legally permissible

             2) Physically possible

             3) Financial feasible

             4) Maximally productive

In short, the HBU attempts to hold the condemnor responsible for the greatest compensation amount that can be sustained by an objective analysis of a respective property.

An interesting application of the principle was attempted recently in the California case of County of Santa Barbara (Plaintiff and Respondent) v. Double H Properties, LLC (Defendant and Appellant). This case was initiated by the County for the purposes of obtaining an easement to serve as a habitat for the endangered California Tiger Salamander. In valuing the land, the owner’s appraiser submitted two theories, one which analyzed the property as rural farmland, and one which calculated the value of the property when used for mitigation credits.

Mitigation credits are a way that a developer can obtain entitlements when a project is likely to impact an environmentally sensitive or protected habitat. To earn these entitlements, the developer can purchase mitigation credits with a mitigation bank. The bank then purchases and preserves another property to offset the environmental impact of the original construction.

The owner’s appraiser argued that, only when the land was valued as mitigation credits, did it fulfill its highest and best use, and obtain the greatest value. Their assessment also exceeded in value the one put forth by the County’s appraiser, who valued the property as farmland. The County moved to exclude the landowner’s valuation, a motion which the Trial Court granted.

The owner took the case on appeal. In reviewing the Trial Court’s dismissal of the owner’s mitigation credit theory, it became apparent to the Appeals Court that the appraiser had never provided any evidence that the land could be entitled for mitigation credits. In other words, the appraiser had failed to show that the use of the land for mitigation credits was affirmatively permissible in the law. The Appellate Court held that the Trial Court did not abuse its discretion in excluding the mitigation credit appraisal.

This will likely not be the last time we see this argument made in regards to a highest and best use analysis in California or elsewhere.

“That’ll Be the Day” – The Accommodation Doctrine and Landowner Dispute Resolution

“You say you’re gonna leave, you know it’s a lie,

‘Cause that’ll be the day when I die.”

– Lyrics from “That’ll Be the Day,”by Buddy Holly.

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Image of Buddy Holly – Courtesy of Oddopolis.com.

In American property law, an ownership distinction can be made between the holders of the surface rights and the mineral rights of a particularly property. In other words, it is possible for the surface of a property and its subsurface, to have separate owners. Predictably, the ability of the law to make this distinction has led to legal conflict. These clashes, over time, have produced what is known as the Accommodation Doctrine, a principle which seeks to govern the relationship between surface interests and mineral interests. It attempts to balance the interests of both parties in a just and proportional manner.

One formulation of the Accommodation Doctrine states that “an oil-and-gas lessee has the implied right to use the land as reasonably necessary to produce and remove the minerals but must exercise that right with due regard for the landowner’s rights.” (Getty Oil Co. v. Jones)  Under this principle, the mineral estate is understood in the law to be dominant. Because a mineral estate would be worthless were it inaccessible, and because surface alterations may be required to ensure access, the mineral estate receives the right to use the surface estate. Therefore, the mineral estate is considered dominant. It is for the same reason that the surface estate is considered servient.

The Texas Supreme Court recently considered the accommodation doctrine in Coyote Lake Ranch, LLC v. The City of Lubbock, in the Supreme Court of Texas. The Coyote Lake Ranch, located in Bailey County, sits atop the Ogallala Aquifer, a water table stretching across multiple states. Over 60 years ago, during a severe drought, the City of Lubbock, Texas purchased the Ranch’s groundwater to provide water to its residents. The deed preserved certain amounts of groundwater for the Ranch to use for domestic purposes, ranching operations, oil and gas production, and irrigation. The deed also granted the City of Lubbock tremendous latitudes to extract water and conduct exploratory drilling operations.

In 2012, the City indicated that it was interested in developing new wells, in addition to the eighteen that it had established since purchasing the groundwater rights. Specifically, the City expressed an intent to drill as many as eighty new wells, and argued that its rights, granted by the deed, permitted these activities. Understandably, the Ranch’s management did not respond with enthusiasm, and attempted to work with the City to find an alternative. Unable to reach an agreement, the City began clearing vegetation from the Ranch to create pathways to potential drilling sites. In response, the Ranch sued the City, successfully in the trial court, to enjoin their actions.

Application of the Accommodation Doctrine seemed the surest way to resolve the conflict of interest between the City and the Ranch. However, uncertainty arose from the fact that the Doctrine had never been applied to cases involving groundwater estates. Upon its examination of the issue, the trial court found that groundwater interests were sufficiently similar to mineral interests, and held the Doctrine applicable.

In light of this finding, the Court ruled that the City had a right to the reasonable use of the surface insofar as the use of the surface was necessary to access and recover the groundwater. The Court found that, by barring the City from damaging the surface vegetation, the trial court’s injunction effectively precluded any possibility for recovery of the groundwater. For these reasons, the Supreme Court upheld the Court of Appeals’ judgment reversing the trial court’s injunction and remanding the case for further proceedings.

As the study of cases like Coyote Lake Ranch, LLC v. The City of Lubbock may suggest, applications of the Accommodation Doctrine rarely produce satisfactory results for all parties. Often, the Doctrine is applied to situations where contract language is unclear or absent on such issues. Perhaps there will one day be a more effective method of resolving these disagreements to the satisfaction of all parties involved, but it seems clear that such a remedy has not yet been found. As Buddy Holly used to say, “That’ll Be the Day…”

New TxDOT Plan “CityMAP” Presents New Alternatives to Reduce Congestion

Landowner's Bill of Rights TX

The Texas Department of Transportation (TxDOT) recently announced a new plan called CityMAP which outlines the department’s initiatives to address Dallas’ current and future transportation issues. CityMAP, short for Dallas City Master Assessment Plan, constitutes a change in direction for TxDOT, which has a long tradition of attempting to resolve congestion issues by funding road-expansion projects. After years of mixed results, the department has decided a change in methodology was required.

A major finding emphasized by the report was the fact that many Dallas highways currently function as physical barriers that isolate neighborhoods, making them nearly inaccessible, and severely limiting economic opportunities. The report suggested that removing highways or highway sections, or applying modifications such as lowering highway might help improve access, which could in turn spur economic development.

The study projects that at its current growth rate, the number of drivers will surpass the capacity of the highway system by 2040, despite a number of active highway-expansion projects. Such research, combined with a new focus on urban development, has led to a shift from highway traffic, to city, or urban related traffic. The thought is that making the city more suitable for cyclists or pedestrians would cause citizens to walk or bike with greater frequency, which would decrease the overall number of cars on the road and improve traffic efficiency.

But how will complete abandonment of these highways impact the landowners who lost their property to the original highway construction? Subchapter E of the Texas Property Code may have the solution.

To view the Texas Landowner’s Bill of Rights, click here.

Transfer of Pipeline Easements Cannot Be For Private Use

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– Enbridge pipeline under construction. Photo Courtesy of CBC.com.

In Allen v. Enbridge G & P, L.P., Enbridge G & P brought condemnation action against the Allens for the purpose of securing two easements, one permanent and one temporary, from the landowners. Enbridge required the easements for the installation and maintenance of a pipeline which would carry natural gas products. A permanent easement of 50 feet in width would contain the pipeline and a 25-foot easement would be used as a temporary workspace. At the special commissioners’ hearing, Enbridge was awarded the easements. Mr. and Mrs. Allen filed objections, and the proceeding was brought to the trial court.

On appeal, Mr. and Mrs. Allen brought two issues, the second of which concerned the ability of the easement holder both to maintain the benefits and burdens of the Plaintiff and Defendants, and allow an assignee to do likewise. Paragraph X of Enbridge’s Second Amended Petition contained the following:

“The benefits and burdens of this Permanent Easement shall be binding upon and shall ensure to the benefit of Plaintiff and Defendants, and to their respective successors and assigns.”

Mr. and Mrs. Allen argued that this language allowed Enbridge to assign the property for private use, rather than strictly public use, and was therefore in violation of the constitutional prohibition against private use takings. The Tyler Court of Appeals found that though “certain easements may be assigned to a third party, that third party’s use cannot exceed the rights expressly conveyed to the original easement holder.” Cantu v. Cent. Power & Light co. It also found that “companies possessing the right to condemn private property for a public use cannot do what they please with the land condemned, but only what is reasonably necessary to carry out the purpose for which the land is taken,” and that “anything beyond this is not the taking of private property for public use, but the taking of private property for private use.” Aycock v. Houston Lighting and Power Co.

Because the language in the Second Amended Petition permitted Enbridge to assign the easement without restriction, the Court of Appeals modified the trial court’s final judgment by restricting the easement’s assignment only to an assignee that qualifies as a transporter of natural gas as defined in Texas Utilities Code, Section 121.001(a).”

In summary, landowners should diligently look at the language of the pipeline company’s proposed easement to make sure it cannot be transferred for a private benefit.

To view the case, click here.