Condemning Private Property to Build Transmission

Eminent Domain Issues Percolate

Ken Silverstein | Apr 21, 2011

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A transmission case in Montana is getting ensnared in both the state capitol and in the local court house. It’s centered on “eminent domain” -- whether state law allows energy developers to take private property for public use. 

 

It’s a classic situation of trying to strike the right balance between the “public good” and “property rights.” The decision reached here could have ramifications for how other cases around the country are resolved. And it’s vitally important that such disputes are remedied in a way that does not inhibit the development of green energy sources that rely on new wires to carry those electrons. 

 

While Montana’s state legislature and court system take up the issue, it will also be debated on Capitol Hill where a bill to limit eminent domain rights is gestating. Generally speaking, the common solution is for the two sides is to work out an amicable agreement -- one that will require companies to use circuitous routes that deviate from the original plans.

 

Without the ability to exercise their right of eminent domain, developers say they won't do business in a jurisdiction and the people will therefore suffer. Property owners counter that many of the projects are unnecessarily intrusive and that the laws don't give either transmission or pipeline companies the right to profit at their expense -- a proposition that oftentimes gives them inadequate compensation for their troubles.

 

As for Montana, it would be home to a 215-mile power line that would reach into Alberta, Canada. The developers of the so-called Montana Alberta Tie Limited project have been trying to use eminent domain to take one landowner’s property so that they can build. But the property owner is balking. 

 

A district court agrees with the landowner. Now the private builder has appealed to the Montana Supreme Court, although the state legislature there has been debating the issue. A measure now pending would nullify the lower court’s ruling but that bill has come to standstill in the state senate’s energy committee, which is split. 

 

It all comes atop a 2005 U.S. Supreme Court ruling involving a Connecticut case called Kelo versus City of New London in which the High Court decided that government could condemn private property for the public good and even if it involved private development such as hotels and shopping centers.


Right Chord

 

That diverged from previous interpretations of the law, which said that eminent domain rights could be exercised if such things as roads, schools and hospitals were built. In response to that 2005 Supreme Court 5-4 decision, 34 states have passed laws to try and limit those rights.

 

Now, two U.S. lawmakers have introduced a bill that would chip away at eminent domain rights. It would do so by eliminating federal funding for any municipality that would condemn an individual’s property for private use. 

 

“This would finally provide some federal protection for the property rights of all Americans, especially the poorest and most-vulnerable, from the alliance of land-hungry developers and tax-hungry government officials,” says the Castle Coalition, which is dedicated to protecting property rights. 

 

Here’s the dilemma: According to the American Wind Energy Association and the Solar Energy Industries Association, $50 billion to $60 billion of new investment is needed to build out the transmission infrastructure over the next decade. That would accommodate the expected 260,000 additional megawatts of renewable power to come on line. 

 

All that is jeopardized, the groups say, because the existing regulatory structure provides little incentive to invest in transmission. That’s because one state can reject a permit to build a line in its territory even though such wires would traverse multiple states. The groups want the Federal Energy Regulatory Commission (FERC) to approve and permit all multi-state electric transmission projects -- just as it does those for natural gas pipelines. 

 

“For green power superhighways, the extra-high-voltage facilities ... would be subject to FERC approval and permitting,” say the associations in a white paper. “Separate siting approval at the state level would not be required. FERC would act as the lead agency for purposes of coordinating all applicable federal authorizations and environmental reviews with other affected agencies.”

 

It’s tough to accommodate more green power without alienating the property owners who don’t want to sacrifice their land. Policymakers are working to hit the right chord and the decisions they reach will provide a roadmap for others. 

 

EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN.

Follow Ken on www.twitter.com/freehand1200

 

energybizinsider@energycentral.com.

 

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Comments

Not a license to steal--especially if it ruins the economy

Amendment 5 of the Constitution states"...nor shall private property be taken for public use, without just compensation..."  If private property is being taken from one entity to be given to another non-governmental entity to build a facility that will make that non-governmental entity a profit, I hardly think that qualifies as "public use."  And, since the Constitution spells out the rights of the citizenry, the powers and limitations thereon of the various branches of government, the powers and limitations thereon of the federal government and the state governments, I fail to see how eminent domain gives a non-governmental entity the right to take anyone's private property.

This whole "green energy" program is contributing big-time to bringing the United States to its knees--if not flat on its back--financially.  We are taking money from taxpayers and giving it to for-profit entities to build and operate economically unjustifiable technology that is causing major disruptions to the reliability of the electric power grids.  The production tax credits, and particularly grants given in lieu of PTCs, are taking taxpayer money to pay for wind turbines and other green equipment that is imported in many cases.  A tax credit and a tax break are two different things.  If a governmental entity is giving a firm a tax break or exemption to bring in a business that would not have been there to create jobs then the taxpayers may not win, but they do not lose either.  A tax credit puts money taken from taxpayers into the hands of for-profit entities--especially when the grant is taken. 

Let's make it simple--if one goes out and buys a Nissan Leaf electric vehicle and gets a $7,500 tax credit from Uncle Sam, Nissan is, in effect, being paid $7,500 of taxpayer funds so taxpayers are funding a individual's car purchase and Nissan is still getting its full profit.  I do not want my tax money being used to buy someone else's car--especially since it is probably an extra vehicle because the person needs an IC engine vehicle for longer trips.

Look at what happened to Spain.  An editorial in the April 2011 issue of Power magazine discusses a study done by an economics professor at the University of Madrid.  Spain's economy crashed in large part due to wind power subsidies paid for by governmental deficit spending.  The study found that Spain lost 2.2 private industry jobs for every "green job" created and that each "green job" effectively cost the Spanish government $790,000 in today's money.  The disruption to Spain's private, for profit, productive industries was devastating.  AND THE USA IS GOING DOWN THE SAME PATH.

Eminent Domain in Montana

If these transmission lines actually sent power to Montana residents, it would be one thing, but the MATL line (owned by a Canadian company) is planning to send the power to the southwest (second leg of the transmission line). Not one kilowatt will be used by Montanans. The real crux of the problem is that the Montana Legislature and Governor Brian Schweitzer want to allow a foreign entity to take Montana land. Tonbridge is not a public utility. These facets are what makes this issue so despicable.

Proponents have been touting wind energy (green) and JOBS! They tell only half truths. The Environmental Impact Statement for MATL says the jobs will be "minimal." What kind of energy will they be sending down the wires when the wind isn't blowing? My guess: coal-fired energy. The wind-generation units should be built closer to the end-use customer, which in this case is not Montanans.

Obsticals to Transmission Lines

I understand Ken's articles try to focus on a specific topic.  But in this instance it may be worth adding that  who ought to pay is the second significant issue with new transmission lines. 

Of course each 'side' wants the other to pay.  Developers argue that carbon-free energy is a common good, and thus should be included in the rate base of the large community of users.  Others argue that the developer intends to make a profit with the new facility; lines are an incremental cost of that facility and so ought to be included in that cost

The second Solomonic issue.

Share the wealth

The structure of such takings seems to exacerbate the feelings of legally being robbed by your government. The premise that paying current market value when one has no desire to sell for that price cuts across all sence of fairness and rights. The oil business has a slightly similar situation , atleast from the hard feelings side, when it comes to severed or separated minerals from the surface ownership. If all the mineral rights are owned by others rather than the surface owners there is a stage set for conflict. In our state the mineral estate has the right to explore and develop those minerals. The surface owner, who is about to bare whatever degree of inconvenience that drilling and producing oil and/or gas brings, is going to resent the intrusion, this is a classic lose/win situation. I certainly wish we could get back to the surface having atleast 1/2 of the minerals at a minimum. That way the surface atleast has a chance to enjoy whatever future value may come from the venture. I think the same principle could apply to eminent domain issues discussed above. If the land is not for sale the price paid for that taking should reflect that fact. It would become we're sorry to have to do this and we're showing that by the enhanced price we'll pay under the circumstance. If the venture is one which will generate revenues than include the landowners. The oil business gives a royalty to the landowner which allows them to share in the wealth of a successful venture. The landowners even get money up front for just allowing the company to lease the property. That results in the mineral owners profiting even if the company fails to drill or gets a dry hole. The company gets what it needs and the landowners/mineral owners are content. On ventures which stand to greatly increase the property value I think there should be a reassessment of that value of the taken property at defined time interval(s) and again paid to the landowner who was forced to sell. In many ways the oil and gas business can serve as a successful model for this issue. It is not perfect but their approach of sharing the wealth potential has worked for a long time.