California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

I presented an update on eminent domain/redevelopment issues making their way through the legislature at this week's IRWA Chapter 67 (Orange County) monthly meeting, and I've received a few follow-up requests for more information.  So I decided it was probably worthwhile to put all the information here on the Nossaman blog. 

• Status of California Redevelopment Agencies:  It's now been several weeks since the  attempted Assembly votes, where Governor Brown's attempt to eliminate redevelopment agencies fell one vote short.  The Governor needs the $2.2 billion in redevelopment funds this year to bridge the budget deficit.  It sounds like there is some intense back-channel lobbying taking place with the Redevelopment Association proposing a voluntary suspension of their funding or at least agreeing to contribute a portion of their revenue stream to local school districts.  I spoke with a few connected people this week and word is that Governor Brown's elimination plan -- at least as proposed -- is not likely to pass (aside from the Assembly, the proposal would also need to pass the Senate, which does not seem likely).  We'll just have to wait and see what ultimately comes of this.

• Federal eminent domain legislation: The House is currently considering H.R. 1433, dubbed the "Private Property Rights Protection Act of 2011," which is a bill that would prevent states and municipalities from using eminent domain for economic development purposes (such as redevelopment) on any project for which the agencies are receiving federal funding.  H.R. 1433 also prohibits the federal government from using eminent domain for economic development (including increasing tax revenue or creating jobs for general economic growth).

• Use of Redevelopment Funds for Sports Teams:  Assemblyman Chris Norby (Fullerton) has introduced AB 1234, which would prohibit redevelopment agencies from using tax revenue or bond proceeds to develop, recruit, or retain any professional sports teams.  This legislation, if passed, could potentially kill a new stadium for the Oakland A's or the San Diego Chargers, which are both being contemplated through the use of redevelopment funds.  (In case you missed it, read a more detailed article here.)

• Inverse Condemnation Liability:  AB 328 is also working its way through the State Assembly; it is a bill that would require a reduction in compensation payable to a successful plaintiff in an inverse condemnation action in direct proportion to the owner's percentage of fault in causing damages to the owner's property. This would change current law whereby a public entity is liable for 100% of the damages where its project causes physical damage to private property, regardless of whether others contributed to those damages.

• Renewable Energy Mandates:  This week, Governor Brown signed Senate Bill 2X, which requires private and public utilities to obtain 33% of their electricity from renewable energy resources by 2020, raising the target from the current 20%, while providing the flexibility necessary to meet the higher standard.

We'll follow-up on these legislative issues as soon as we catch wind of anything newsworthy. 

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According to an article in this week's New York Times, "Solar Power Plants to Rise on U.S. Land," the United States has approved two large solar power plants to be built on federal lands.  This is the first time such large plants will be built on federal land, and both are slated for California. 

The first plant is proposed by Tessera Solar and will be built on 6,360 acres in the Imperial Valley.  The second plant is proposed by Chevron Energy and will be built on 422 acres in the Lucerne Valley.  When completed, the two projects could generate enough energy to power as many as 566,000 homes.

Aside from these two projects, several others are expected to be approved this year as well; Interior Secretary Ken Salazar is quoted as saying: “It’s our expectation we will see thousands of megawatts of solar energy sprouting on public lands.”

The major hurdle, however, appears to be finding excess capacity on transmission lines in the desert, most of which already operate at or near capacity.  Perhaps there may be some capacity on Southern California Edison's new Tehachapi project, which we've reported on multiple times in the past.  Otherwise, energy companies may be faced with constructing new lines, like San Diego Gas & Electric's 123-mile Sunrise Powerlink project.  If additional transmission powerlines are necessary, eminent domain may well follow.

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Earlier this week, Chino Hills voted 3-0 (with two members abstaining for conflict reasons) to appeal an earlier court ruling that the Public Utilities Commission has "exclusive jurisdiction with regard to the right-of-way property rights issue between the City and SCE regarding the Tehachapi Renewable Transmission Project route through Chino Hills."  

Southern California Edison's Tehachapi Renewable Transmission Project is a massive, $1.8 billion project designed, in large part, to connect wind farms in the Tehachapi area to the main electrical grid.  The project involves installation of approximately 175 miles of transmission lines, much of it through remote, undeveloped area and within existing Edison right-of-way. 

Some new right-of-way is required, and SCE has been acquiring that right-of-way through a combination of negotiated acquisitions and eminent domain actions. 

One segment, in particular, has been the subject of controversy.  Segment 8a focuses on replacing existing 220-kV lines in the Chino Hills area with new, larger 500-kV lines.  SCE describes this segment as follows:

Replacement of existing single-circuit, 220 kV line that runs from the existing Mesa Substation area to the Chino Substation area and existing double circuit, 220 kV line from Chino Substation to the existing Mira Loma Substation with a 32-mile double-circuit, 500 kV line.

Residents in Chino Hills don't like the plan, and the City has been fighting with SCE over possible alternatives.   The latest skirmish involves an April 2010 decision, in which the court ruled that it has no jurisdiction over SCE's route-selection process.  The ruling allows a December 2009 decision by the PUC approving the Project, including Segment 8a, to stand.   The PUC's order approving the project makes clear the high stakes involved:

It is imperative that California sites and constructs transmission more expeditiously, and this Decision is a step in the right direction. It is important that we invest in the critical infrastructure that will move us incrementally closer to our renewable energy goals while fostering green collar jobs opportunities.

Now, the City has decided to appeal the court's ruling, hoping to overturn the PUC's approval.  An April 15, 2010 Press Release provides more details and background on the City's arguments and the history of the dispute.

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Both Chapters 57 and 67 of the IRWA have June meetings upcoming (their last meetings before the summer hiatus).  Details are:

• June 2, 2010:  Chapter 57 is meeting at the Riverside Convention Center, located at 3443 Orange Street, Riverside.  The speaker will be Ken MacVey, an eminent domain attorney with Best, Best & Krieger in Riverside.  Contact Communications Chair Jan Spindler for more information. 
• June 8, 2010:  Chapter 67 is meeting at the Holiday Inn, Orange County Airport, located at 2726 South Grand Avenue, Santa Ana.  We will have two speakers, Ricky Rodriguez from Caltrans and Tom Bogard from OCTA.  In addition, Chapter 67 will be swearing in its new Executive Board, including Michele Folk from OPC as incoming President and a truly brilliant eminent domain attorney, Rick Rayl (wait, that's me), as incoming President-Elect.  Contact Hospitality Chair Joe Munsey for more information. 

In addition to those regular meetings, Chapter 1 (Los Angeles) is holding a full day, "Right of Way and the Law Seminar," on June 22, at the Quiet Cannon, located at 901 North Via San Clemente, Montebello.   The entire panel looks great, but I want to highlight the 2:30 presentation being given by one of my partners, David Graeler, along with Joe Avila of Avila & Putnam, both very good eminent domain attorneys. 

David and Joe are offering a presentation entitled How the Push Toward Renewable Energy Sources Will Impact Eminent Domain, a topic not dissimilar from the topic I spoke on earlier this month at Chapter 67's Renewable Energy Seminar.  The event should be a good one, as Chapter 1 always puts a lot of work into its programs. 

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Yesterday, I chaired the International Right of Way Association Chapter 67 (Orange County) spring seminar, focused on the interrelationship between renewable energy, right-of-way acquisitions, and eminent domain.  It was a great success.  For those of you who were in attendance -- or for those of you that missed the seminar but would like a recap -- all of the speakers were generous enough to allow us to make their presentations available.

• Dave Kilpatrick's presentation, titled "Energy Independence -- the Impossible Dream?" [PDF], focused on our nation's overall energy policy, dependence on foreign oil, and how reliance on renewable energy can solve -- at least partially -- our energy issues.  Mr. Kilpatrick painted the picture that while our decreasing supply of traditional energy sources is problematic, our bigger concern is the increasing demand not just from the US, but from other countries like India and China.  Mr. Kilpatrick also pointed out that while there are renewable energy options that could play a large part in helping solve our energy crisis, most of these options are plagued with economic limitations.
• Rick Rayl's presentation, titled "Renewable Energy Meets Eminent Domain -- When Grandma's House Gets in the Way of Windmills" [PDF], focused on some of the unique laws that allow privately held utility companies to condemn property for energy projects, and some of the legal issues that arise in valuing impacted properties.  A hot discussion point was whether private utility companies should offer to pay impacted property owners up to $5,000 to obtain an independent appraisal.  Mr. Rayl concluded that while utility companies may not technically be required to make such an offer (an issue that remains unclear under current law), it makes good sense to do so.  Mr. Rayl pointed out that such an offer allows the property owner to feel secure in the utility company's offer, and it may result in the utility company's avoiding having to pay thousands -- and potentially hundreds of thousands -- of dollars in legal fees in an eminent domain battle.
• Elizabeth Kiley's presentation, titled "Kicking the Dirt -- How Energy is Changing Land Use and Values" [PDF], focused on various appraisal issues involved in renewable energy projects and right of way acquisitions for such projects.  Ms. Kiley presented a somewhat rosy picture for those properties out in the "middle of nowhere" that previously had no real value, as they may now have a highest and best use as a solar or wind farm site, especially where the properies lie near major transmission corridors.  Although there have not been many "closed' transactions yet, many deals are in the works pending entitlement approval, and desert property values are experiencing an uptick.
• Cliff Clement's presentation, titled "A Walk in the Wind" [PDF], walked us through a wind farm project from concept to entitlement to construction and, finally, to completion.  Going through the Power Point is definitely a must, as you'll be amazed at what goes in to selecting an appropriate site and constructing these massive wind turbines.

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Next week, I'm speaking at the IRWA Chapter 67 Spring Seminar, which is focused on renewable energy issues.   So it was pretty timely when I came across an article this week involving efforts in Wyoming to curtail eminent domain power to address that state's push for increased renewable energy. 

According to a Casper Star-Tribune article by Dustin Bleizeffer, Wind boom inspires another look at state's eminent domain laws: Crossing private property, Wyoming has seen a wave of efforts to use eminent domain to acquire right of way for "collector lines," used to connect wind turbines to the electrical grid.  And, these efforts have not been limited to connecting built turbines to the grid:

[T]he recent realization that this power can be used to acquire easements for "collector lines" to connect yet-to-be-installed wind turbines to the electrical grid has raised concern among Wyoming politicians.

Wyoming's governor signed a one-year moratorium on the use of eminent domain to acquire collector-line easements, but the state is considering a more permanent ban.  According Governor Dave Freudenthal, "because the potential scope and impact of the collector line build-out affects so many Wyoming citizens, the issue deserves to be at the top of the state's legislative agenda."

One problem legislators face is that they appear willing to consider restricting the use of eminent domain for the collector lines, but fear that openly discussing the issue will lead to a push for restrictions on other uses of eminent domain.  This is not surprising, given broader attitudes about eminent domain since 2005's Kelo decision.

Aside from discussing the basic right to take property for collector lines, Wyoming is also confronting how one establishes fair market value if such condemnation is allowed.  Mr. Bleizeffer's article mentions concerns about valuation. 

He addresses problems involving highest and best use, as the property condemned for collector lines is typically valued at an agricultural highest and best use, even though it is being acquired for an industrial use.  He also raises an issue that has appeared in various states over the past few years:  whether it is fair for owners who have collector lines through their properties to receive only a single payment, even though neighboring owners who have actual wind turbines on their property typically receive annual payments in perpetuity. 

It's a complicated issue, and one that will undoubtedly play out across the country as we push to meet increasing renewable energy targets. 

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Just a reminder about two upcoming events that you may be interested in attending:

• On May 5, IRWA Chapter 57 (Riverside/Inland Empire) will hold its monthly meeting at the Riverside Convention Center.  The speaker is Carol Brooks, and her topic is "Conflict Management:  How to Stay Cool in the Heat of Conflict."  Sounds like an interesting topic for all you right-of-way folks and relocation consultants that regularly deal with property and business owners facing eminent domain and relocation.

• On May 11, IRWA Chapter 67 (Orange County) will hold its annual half-day Spring Seminar focused on the interrelationship between renewable energy, right-of-way acquisitions, and eminent domain.  I will be chairing the seminar, and my colleague, Rick Rayl, will be speaking (you can find a more detailed discussion of all the speakers and topics here).  While not all of you may deal with renewable energy issues in your day-to-day work, renewable energy is going to be a more important and wide-spread topic in the near future as the federal and state governments continue to place additional restrictions and requirements on our reliance on traditional energy sources.  When one of your speaker's presentations is titled "When Grandma's House Gets in the Way of Windmills" (thank you Mr. Rayl), you know you're going to have a fun and interesting seminar. 

If you'd like to attend Chapter 57's lunch, you can RSVP to Jan Spindler at the City of Riverside by phone at (951) 826-5498 or by e-mail at IRWA_Chapter57@yahoo.com.  If you're interested in attending Chapter 67's Spring Seminar, please feel free to give me a call at (949) 833-7800, or send me an e-mail at bkuhn@nossaman.com.  Look forward to seeing you at both events.

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On May 11, Chapter 67 of the IRWA (Orange County) is hosting a half-day seminar focused on the interrelationship between renewable energy, right-of-way acquisitions, and eminent domain.  If tying renewable energy to eminent domain sounds like a bit of a stretch, you apparently haven't been following all the recent news about the struggle to entitle and build renewable energy projects.  Just yesterday, the White House Blog featured a profile on federal energy policies entitled Building a New Foundation for Energy and the Environment. 

Between the project facility itself and the right of way necessary to connect renewable energy projects to the grid, myriad eminent domain issues arise.  And, fights over energy projects in particular have made news lately in the ongoing battle over eminent domain reform.  Stories about eminent domain issues involving natural gas pipelines and wind farms have gone viral in the past six months -- and this is likely just the tip of the iceberg. 

The panel for May 11 includes a range of practitioners:

• David Kilpatrick, President of Kilpatrick Energy Group will speak first.  He will talk about our overall energy policy, dependence on foreign oil, and how (if at all) reliance on renewable energy can solve our energy issues.
• I will speak second about the legal intersection between renewable energy and eminent domain.  I will talk about some of the unique laws that allow utility companies (and, in particular, privately held utility companies) to condemn property for energy projects.  I will also talk about some of the legal issues that arise when trying to value a property both for energy projects themselves and when an energy use may qualify as the highest and best use for property being condemned for some other purpose.
• Elizabeth Kiley, President of Kiley Company, will speak third.  She will talk about various appraisal issues involved in renewable energy projects and right of way acquisitions for such projects.
• Finally, our lunch speaker will be Clifford Clement, Vice President, Land, for Third Planet Windpower, LLC.  Mr. Clement will walk us through a wind farm project, from concept, to entitlement, to construction, and, finally, to completion. 

If any of this sounds like it may impact your practice, please come spend the morning with us.  And, even if none of this sounds remotely interesting, come spend the morning anyway.  My colleague, Brad Kuhn (who is Chairing the Seminar), has worked hard to ensure attendees will receive four hours of credit for OREA, MCLE, and/or SR/WA. 

And, most importantly, if nobody shows up, I'll have to spend the morning talking to myself -- and while I do that on a regular basis, I try not to do it in public.  See you there.

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If you are an eminent domain attorney, a right-of-way agent, or an appraiser working in Southern California, you will have ample opportunities to expand your horizons (or at least your networking circles) in April.  Here's just a sampling of what's coming up locally:

• April 12-13:  CLE International is holding its 12th Annual Eminent Domain Conference at the Millennium Biltmore in Los Angeles.  If you're looking for two full days of hearing about eminent domain . . . you probably need help.  But if you are, this is a great program, with a number of top speakers.

• April 13:  IRWA Chapter 67 (Orange County) is holding its monthly lunch meeting.  Orange County Assessor Webster J. Guillory will be speaking.  As usual, the event will be held at the Holiday Inn, Orange County Airport, 2726 South Grand Avenue, Santa Ana, commencing at noon. 

• April 14:  IRWA Chapter 57 (Inland Empire) is holding its monthly lunch meeting.  James M. (Mike) Hart, a licensed land surveyor, will be providing an overview of the structure of bearings.   The meeting will be at the Riverside Convention Center, 3443 Orange Street, Riverside, California. 

•  April 27:  IRWA Chapter 1 is holding its 2010 Valuation Seminar.  This all-day event has a wonderful panel.  And, for those wondering how things are working in the Los Angeles County Superior Court now that Department 59 has been closed, Commissioner Mitchell is a recent addition to the list of speakers.  The seminar is being held at the Quiet Cannon, 901 North Via San Clemente, Montebello.

And, finally, if that isn't all the eminent domain you can handle, IRWA Chapter 67 is holding its 2010 Spring Seminar, Renewable Energy – The Shift of Power on May 11.  I will be speaking on some of the unique issues that can arise in eminent domain when renewable energy projects (or potential highest and best uses) come into play.  More about that as it gets closer. 

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We've previously reported on some of the major renewable energy projects currently underway, such as Southern California Edison's Tehachapi Renewable Energy Transmission Line Project and GE's plans to design the largest wind farm in the world.  After a major planning effort, it appears that another renewable energy project -- the Sunrise Powerlink project -- may be moving forward as well.  

According to a March 7 San Diego Union Tribune article by Onell Soto, the 123-mile, $1.88 billion Sunrise Powerlink project has obtained approval from the Public Utilities Commission and the Bureau of Federal Land Management, but is still waiting approval from the U.S. Forest Service.  The project is also facing challenges by the County of San Diego. 

Despite those challenges, property acquisitions for the project have commenced.  In addition to several voluntary acquisitions, eminent domain actions to acquire some of the necessary property for the transmission line right-of-way are underway.  (For those wondering, private utility companies typically have the power of eminent domain for public projects.)  Filing the eminent domain actions now is likely necessary in order to obtain possession of the impacted properties in order to meet the project's construction timeline (construction is scheduled to begin this summer).

The eminent domain process is necessary when a condemning agency and the property owner cannot agree on an acquisition price.  For projects like the Sunrise Powerlink project, disputes over "fair market value" typically involve how the high-voltage transmission lines will impact the remainder of the owner's property, not necessarily the value of the right of way being acquired.  

In some instances, a power line's transversing a parcel arguably leaves the remaing property with no remaining economic value, generating significant "severance damages."  Not surprisingly, cases involving such severance damages often involve a wide range of opinions among eminent domain attorneys and appraisers.  

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We've previously reported on the increase in renewable energy projects in California, such as Southern California Edison's ("SCE") Tehachapi Renewable Transmission Project.  When it comes to wind farms, General Electric now takes the cake:  it has brokered a $1.4 billion contract to supply wind turbines and services for a wind farm that would be larger than any wind farm currently in operation in the world. 

According to a December 10 Bloomberg article GE Wins $1.4 Billion Order for Oregon Wind Farm, the 338-turbine wind farm will stretch across 30 square miles in Oregon, and will help the slumping economy by providing 400 jobs during construction.  With GE already obtaining most of the necessary government permits, the two-year construction project is set to begin in 2010, and will require building 85 miles of road and 90 miles of power lines. 

What does this mean for California?  The wind farm will provide enough clean energy power to power approximately 235,000 California households, and it will supply a tenth of SCE's renewable energy. 

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