Buy the Farm at MN Appellate Court

Filed under:Appeal,Brookings Routing Docket,Cost Recovery,Fargo-St Cloud,FERC,Nuts & Bolts,Upcoming Events — posted by admin on May 21, 2012 @ 2:50 pm

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Last week, Thursday to be precise, the “Buy the Farm” provision under the Power Plant Siting Act and Northern States Power’s challenge to compensation avenues available to landowners electing the “Buy the Farm option under Minn. Stat. 216E.12, Subd. 4 was at the Minnesota Court of Appeals.

This case stems from the St. Cloud to Monticello part of the Fargo to Monticello transmission line, the first to be permitted.  Now they’re trying to take the land.  The focus of the case is the landowners’ right to relocation compensation and other compensation, available both under Minn. Stat. ch. 117 (Minn. Stat.117.187 and 117.152), the Minnesota Uniform Relocation Act and federal law.  I don’t have a copy of the Stearns County District Court Order being appealed, but I do have a similar order that was issued in Wright County, reference in this brief:

Wright County Order – July 13, 2011

Here’s the court’s page for this case.

littlebirdie-cardinal

And here are the briefs, special thanks to a little birdie (and no thanks to our friends at NSP!):

Appellants NSP, et al., Initial Brief

Appellants NSP, et al., Initial Brief – Appendix

Respondents Enos Pudas – Brief

Respondents Hanson Stich – Brief

Appellants NSP, et al., Reply Brief and Supplemental Appendix

This case is in the news, as well it should be, it is THE appellate case of the year:

Landowners seek fair compensation for impact of CapX power line

May. 19, 2012

ROCKVILLE — Ken and Tess Koltes know the power line is coming, and they can’t stop it.

They know it’s not going to matter much whether they agree to the amount of money offered by the utility companies for the right to run the CapX 2020 line across their century dairy farm in St. Joseph Township, or whether they fight until the bitter end for every last dime.

Still, the Kolteses aren’t ready to go away quietly.

They have to live with the high-voltage transmission line scarring their rolling farm for the rest of their lives and the lives of their two sons, who started milking cows with them just two years ago. So they’re choosing to make it as difficult for the power companies as they can.

“We’ve got to do what we can,” Ken Koltes said. “We’re a small cog in the wheel, but we’ve got to try.”

The couple is among scores of Stearns and Wright county landowners caught up in a complicated legal process the CapX utilities are using to secure the land they need to build the 238-mile power line from Monticello to Fargo, N.D.

The condemnation process can be lengthy, expensive and sometimes daunting for landowners. It’s been used countless times to secure land for highways, buildings and pipelines, but rarely for high-voltage transmission lines.

In fact, this is the first time in four decades Stearns County has seen land condemned for a power line. And it’s the first test of a law passed in 1973 that allows landowners to force utility companies to buy their entire property rather than live beneath a high-voltage transmission line — an option known as “Buy the Farm.” That option has sparked legal debate and a case heard last week by the Minnesota Court of Appeals.

“This is new to almost everybody involved,” said Igor Lenzner, an attorney with Rinke Noonan, a St. Cloud law firm representing dozens of landowners in CapX condemnation cases.

What makes this time different, observers say, is the sheer number of landowners and properties involved and the complexity of the cases, as well as the emotional nature of the cases.

“Nobody wants somebody to come and say, ‘Guess what? We’re buying and you’re selling. You don’t have a choice,’ ” Lenzner said.

Once a route was approved for the power line, the CapX utility companies, which include Xcel Energy and Great River Energy, began seeking the necessary land. In most cases, a 150-foot-wide easement is needed.

Because the transmission line is considered a public good similar to a highway or pipeline, the utilities have the right of eminent domain to seize the land they need. However, condemning property can be a lengthy and expensive process, so the utilities first offer landowners a fixed price for an easement to run the line across their property. Sometimes they include a bonus if the landowners agree to sign immediately.

If the landowner doesn’t agree to the price and negotiations aren’t successful, the utilities file condemnation proceedings. That can be a frightening prospect for a landowner, but Lenzner counsels his clients that it can work to their benefit.

“If they say, ‘You don’t sign, we’re going to condemnation,’ it’s not a big scary thing,” Lenzner said. “That’s a good thing for you, because somebody’s going to make sure you’re getting paid the right amount.”
Difficult calculation

The enormous task of trying to determine how much money the landowners are entitled to falls to three court-appointed commissioners with extensive real estate experience.

One of those is Don Landwehr, a St. Cloud real estate agent who has served on condemnation panels for 40 years. He called the CapX cases the most interesting he’s heard — and the most complex.

Mike Schmitt, a longtime commercial real estate broker who also is on the panel, said there are many more cases and they’re much more involved than he anticipated.

“Every situation is different. Every property owner has different concerns,” Schmitt said.

Condemnation cases are assigned a hearing in front of the panel, which hears testimony from both sides. The hearings can stretch for hours or even days, as appraisers offer detailed reports on the estimated value of the property and how much the owners should be entitled to receive for damages. Those values can vary widely — by as much as tens of thousands of dollars.

“It’s very much an art rather than a science,” said Steve Quam, lead attorney for CapX. “There’s room for very big spreads.”

All appraisers try to do their job in a professional way, said Ed Laubach, an attorney with the St. Cloud office of Gray Plant Mooty, who represents about a dozen landowners in CapX cases. But they all look at properties in a different fashion, he said.

“They’re all human, and they take into account their life experience and their professional experience in coming to an opinion,” Laubach said. “It gets into many different factors, not just the value.”

While attorneys would like to find “matched pairs” — two properties exactly the same, one with a power line and one without — to calculate the difference in property values, those don’t typically exist.

Instead, the appraisers use “comparables” or similar properties, but attorneys quarrel over whether the two properties are really comparable.

“So the commissioners are left with these diametrically opposed views,” Lenzner said.

What’s unusual about CapX is the project involves all types of land — commercial, industrial, residential and agricultural. It ranges from a business along a busy interstate highway to a quiet farm on a country road.

The chaotic real estate market isn’t helping, either. While residential and commercial properties have been dropping in value, agricultural land prices have been on the rise. That makes determining a final value even more difficult.

“I think both the utilities and the property owners are still figuring out what ‘just compensation’ is,” Laubach said. “That’s why cases aren’t settling yet, because there is such a disparity between what the utilities think is just compensation versus what the property owners do.”
What’s the impact?

There’s also disagreement over how the power line will affect the value of the homes, businesses and farms it passes.

While CapX attorneys agree that landowners should be compensated for the strip of land used for the power line, they have argued there’s no evidence of high-voltage transmission lines reducing the value of the rest of the property. Attorneys for the landowners disagree.

“I think it’s just common sense that if you have a 170-foot power line transmission structure constructed on your property and you have a view of that structure from your home or from your business, that it’s going to have an impact on all of your property,” Laubach said.

Lenzner points to the opposition the power line has generated as proof of its impact on land values.

“What that doesn’t fit with for me (is) how vehemently people fight these lines coming on their property,” he said. “People don’t have that visceral reaction … if these lines have zero impact.”

Although many homeowners who live along the power line’s route worry about any potential health risks, that issue isn’t debated much at hearings. Whether the health impacts are real or perceived doesn’t really matter, Lenzner said.

“When we’re talking about value, perception is reality,” he said. “It can be absolutely 100 percent safe, but if 90 percent of the public believes it’s not, you’re going to get hit in the market for it.”

As the condemnations move westward, determining land values is expected to get even more difficult. So far, all of the cases the commissioners’ panel has heard have been along I-94, where CapX attorneys could argue that the properties already were affected by a major highway. But as the project moves toward Fargo, it cuts through rural farms and forests.

“That’s really some of the nicest property in Stearns County, as far as rural, wooded hills,” Lenzner said.

Once the commissioners’ panel recommends an amount, both sides have up to 40 days to appeal to district court. Some appeals have been filed already. But for many landowners, the legal and appraisal fees can make an appeal too expensive.
Buy the Farm

Adding to the complication is Minnesota’s Buy the Farm law, passed after a controversial power line built across western Minnesota in the 1970s spurred mass protests and civil disobedience. Because no high-voltage transmission lines have been built in the state since then, the law has remained virtually untested.

Now that it’s being put to use, there’s much debate over how it should work and how much compensation landowners were entitled to. Moving expenses? Closing costs on a new house?

Attorneys for the landowners asked CapX for compensation for those relocation expenses. But CapX argued landowners aren’t being forced to move; they were choosing to.

“The view of the property owners is, ‘No, we’re moving under duress. We don’t want to stay next to the power line. We have little kids. We just don’t want to take that risk. You’ve destroyed the aesthetics of our home,’ ” Lenzner said.

That issue was appealed, and the state appellate court heard oral arguments in the case last week. Both sides will be watching the decision closely, because it will determine how much landowners in other cases receive.

Lenzner said power companies were concerned that Buy the Farm would lead to hundreds of property owners forcing them to purchase their land, but that hasn’t happened. He said about 10 percent of his clients chose that option.
Emotional ordeal

Because it involves their land, their home, their farm or their livelihood, condemnation hearings can be a bitter experience for many landowners.

“People who have invested their time, effort, energy, raised their families, invested their money and resources into those kinds of properties — it becomes very emotional,” Laubach said.

The commissioners’ hearings can be tense as landowners try to explain the impact they feel the power line will have on their lives.

“It’s their life right there, and all of the sudden, it’s turned upside down,” said Galen Kabe, one of the condemnation commissioners in Stearns County.

CapX officials say landowners are often anxious at the beginning. But as the condemnation process is explained to them, “the anxiety level goes down considerably because they see it’s not stacked against them,” said Tim Carlsgaard, CapX spokesman.

Many landowners don’t understand why CapX is expending so much time and energy over paying a few thousand dollars for their property when the total cost for the St. Cloud-to-Fargo line is estimated at $255 million.

“It feels, when you’re on this end, like the big power company is being very, very tough,” Lenzner said. “I guess you can say, ‘Well, they’re protecting their rate payers.’ But at the same time, when it’s your house, it’s not very fun.”

CapX officials say they have an obligation to their customers to make sure they are keeping the cost of the project under control.

“At the end of the day, it’s you and me and the other rate payers who are paying for this project,” Carlsgaard said.

Carlsgaard said the companies want to make sure everyone is treated fairly.

“If we don’t do this right, if we don’t treat people fairly and with respect and pay them, I think, generously, then as we move forward, we’re going to have a lot of trouble,” he said. “It’s not a perfect process, but we certainly know that if we want to build not only these projects and be successful, but we’re looking at additional projects in the future — we have to do things right the first time.”

For the Koltes family, it’s been a disheartening experience. The couple says whatever money they receive from the power companies won’t make up for the disruption to their lives and land.

“It’s frustrating because it’s going to affect our two sons that are farming with us. They just started farming two years ago,” Tess Koltes said. “It’s just really hard to watch that happen.”

Lenzner said that’s a typical sentiment among his clients.

“Most people would say, ‘I would give the money back any day of the week,’ ” he said. “They say, ‘You know what? If they took the power line down, I’ll give them all the money back today.’ ”

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image: detail of installation by Bronwyn Lace