Eminent Domain

The Issue

Eminent domain is the power of the government or its designees to acquire privately owned land for public use, subject to the protections against unlawful “takings” as provided by the Fifth Amendment of the U.S. Constitution, and similar provisions of state constitutions.

Utilities, railroads and highway transportation entities are commonly granted the right to acquire property through eminent domain. When a property is taken through the process of eminent domain, the owner of the condemned property is entitled to receive just compensation in the amount of the fair market value for the land. In some cases, additional money may be awarded to the landowner if they are running a business or other operation at the site that adds to the value of the property.

What the stakes are

An important step in preventing abuse of eminent domain authority is to have a clear definition of “public use”. Establishing parameters that a project must fulfill to be considered in this category will help to weed out frivolous proposals.

In 2005, the case of Kelo v. The City of New London brought this issue to the fore. The U.S. Supreme Court decision in this Connecticut case allowed the city to take one owner’s private property and transfer it to another private owner for the purpose of economic development. Private-property advocates argue that such action was not the intent of eminent domain laws, because the property condemned was not used for a public purpose.

According to the National Conference of State Legislatures (NCSL), thirty-nine states enacted legislation or passed ballot measures during 2005 - 2007 in response to the Kelo decision. The laws and ballot measures generally fall into the following categories:

  • Prohibiting the use of eminent domain for economic development, enhancing tax revenue or transferring private property to another private entity (or primarily for those purposes).
  • Defining what constitutes “public use”.
  • Establishing additional criteria for designating blighted areas subject to eminent domain. vStrengthening public notice, public hearing and landowner negotiation criteria, and requiring local government approval before condemning property.
  • Placing a moratorium on the use of eminent domain for a specified time period and establishing a task force to study the issue and report findings to the legislature.

SOURCE: http://www.ncsl.org/Default.aspx?TabId=13252

Utility industry practices

Eminent domain is a necessary tool for utility companies to complete projects that require the specific use of certain property for the public good. The issue of eminent domain typically arises in connection with proposals to construct new transmission lines or power plants.

Carbon capture is another area which will require utilities to acquire specific property for the transportation and storage of carbon dioxide. With carbon capture becoming an increasingly important issue, we are seeing the issue of eminent domain spread to a new area. Several states are now looking at extending eminent domain rights to sequestration sites.

Case Study: Indiana and Carbon Dioxide Pipelines

The current jurisdictional void over the siting of CO2 pipelines at the federal level is making eminent domain a hot topic in state legislatures across the nation. Siting for CO2 pipelines is currently a state issue, provided pipelines don’t cross federal lands. In such cases, the Bureau of Land Management controls the siting process.

In Indiana, SB115 which was proposed and defeated in 2010, would have declared the transportation of CO2 via pipeline to be in the public interest. Authors of the bill felt that the transport of captured CO2 by pipelines could help to reduce emissions in the air, and promote economic development. With this declaration came the right to exercise eminent domain. As a provision to this right, any entity choosing to exercise it would need to compensate the owner of the land, as well as pay any costs that the owner may incur when relocating. The amount of the compensation differed depending upon the function the acquired property served:

  • 150% fair market value for residences
  • 125% fair market value for agricultural land
  • 100% fair market value for all other lands

Though the bill did not make it through the legislative process, it raised many important questions about the future of eminent domain usage for carbon dioxide pipelines.