CapX2020 and ‘Buy the Farm’

By: John T. Schmick

Over the past ten years Minnesota statutes pertaining to the use of eminent domain powers have changed. Once biased towards the condemning authority, eminent domain laws are now more balanced and the rights of both property owners & government are considered. The most recent trend is to develop one set of rules for all condemning authorities. Thus, Minnesota’s eminent domain procedures now emphasize Public Service Corporations (PSCs). While there remains room for improvement, the eminent domain process, as it relates to utility company takings, is vastly improved.

Statutes pertaining to pipeline and power line takings are located in MN Statutes Chapter 216: Utilities; not in the more well-known MN Statutes Chapter 117: Eminent Domain. Often referred to as the ‘Buy the Farm’ statute, PCS guidelines are found in MN Statute 216E.12 subd. 4. Chapter 216E describes Electric Power Facility Permits; section 12 references Eminent Domain Powers: Power of Condemnation; and subdivision 4 focuses specifically on Contiguous Land. This obscure statute regulates the process whereby real property is acquired to accommodate a high-voltage transmission line with a capacity of 200 KV or greater. If a PSC uses its eminent domain powers to take part of a property, the owner has the option to also require the utility company to acquire, in fee interest, any amount of contiguous land to which the owner has an interest. Simply stated, when a property is condemned for a high-voltage power line, the owner has the right to insist the utility company (PSC) buy all or any part of the adjacent land. The property owner is also entitled to relocation as an alternative to living next to a power line.

The 345 KV CapX2020 power line (currently under construction in various parts of Minnesota), falls within the scope of MN 216E.12 subd. 4. Thus, any property owner affected by this project must make a decision: negotiate for damages based on a traditional before and after taking valuation analysis, or require the utility to buy the entire property. Some consider the statute burdensome for utility companies, but that’s not necessarily true. Even if the PSC is forced to purchase the entire property at the front end, the ultimate cost to the utility company should be marginal. Once the power line has been constructed and the easement recorded, the utility company is free to sell the property. The difference between the cost to purchase the land from the original property owner and the price for which the PSC sells the land is the true reflection of the damages caused by a new power line to the property. If the real estate market is in a growth mode when the PSC sells, the utility company may realize a profit and project costs will be minimal. If the market is in decline, final project costs may be higher. In either case, the utility company takes the same market risk as every other property owner. Thus, the true cost of the project is borne by the utility company, not the property owner, which is appropriate given that the purpose of eminent domain laws is to protect the property owner while allowing government entities and PSCs the power to acquire land for public use.