Homeland–Spring 2017: A Landowner’s Guide to Eminent Domain
April 7, 2017
"Eminent domain" can strike fear into the heart of many a landowner. It carries with it a hazy concept of the government taking private property to create a park or hiking trail or highway. But what is it, and what does it really mean for landowners?
"First and foremost, most people don't even know what eminent domain means when they are first approached," said Ivar Larson, a Colorado landowner who has personal experience with eminent domain.
Simply put, eminent domain is the right of a government or agency to take private property for public use, with payment or compensation. The matter gets complicated, however, when "public use" is expanded to included "public benefit." Is a pipeline for public use or for public benefit? It may depend on whether the line is carrying a public utility, such as electricity, or a commodity such as oil. In the end, it comes down to how each state's judicial system interprets their laws.
To further muddy the water, compensation for private landowners can be hard to fairly and accurately envision. Landowners need to ensure that they are being properly compensated for something that may impact their land for generations to come. Many eminent domain condemnations are "for perpetuity"– forever.
In 2005, a controversial Supreme Court decision brought eminent domain to the forefront. In Kelo v. City of New London, the Supreme Court ruled the benefits a community enjoyed from economic development could qualify as public use. The ruling caused many states to introduce legislation that would protect private landowners' rights and prevent eminent domain abuse, preventing private companies from declaring eminent domain on any land just to further develop it.
The Castle Coalition, a grassroots property-rights project based in Virginia, has instituted a report-card system of rating each state's eminent domain laws in regard to their protection of private land-owners' rights. The Castle Coalition rates South and North Dakota's eminent domain laws as an A for protecting landowners' rights. Kansas and Wyoming both received a B rating, while Colorado gets a C. The coalition was harder on Nebraska and Montana, scoring their eminent domain laws at a D.
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However, not everyone agrees that the current legislation protects landowners sufficiently. Furthermore, some contend that the current legislation has not kept up with the times and needs to be modernized to reflect the current infrastructure in our nation. As the nation continues to develop, private landowners need to ensure that the laws in their state will protect them sufficiently.
Most eminent domain cases begin when a landowner is approached by an entity to grant an easement to their property. If the landowner refuses, then the entity may seek to condemn the land via eminent domain to gain entry to the property. The landowner must then choose to negotiate the terms of compensation being offered or to legally appeal the eminent domain ruling.
Ivar and Donna Larson, who fought the eminent domain condemnation on their land all the way to the Colorado Supreme Court, feel landowners should do all that they can to keep their rights. "In my case, it was definitely worth it. I didn't feel like I was being compensated for a second line right precluded by the original easement and safety setbacks for two lines like I deserved," said Ivar Larson.
Sinclair Transportation Company sought to declare eminent domain over the Larsons' land in order to add a second line to an existing pipeline easement. In May 2012, the Larsons won their case when the Colorado Supreme Court ruled that eminent domain was not granted to companies to construct pipelines carrying petroleum. The case set a legal precedent that has changed how eminent domain laws in Colorado are now interpreted. "It clarified the interpretation of decades of misused laws and I proved up that the company didn't have eminent domain power," said Ivar.
While it may seem that private landowners have little control over the eminent domain process, there are some things that they can do to protect their property rights. Landowners can negotiate the terms of the easement even if eminent domain is declared.
Larson said landowners must educate themselves in order to protect themselves. "You have to read the fine print. Most companies will want a blanket easement over all your land before construction. A blanket easement basically says they can go wherever they want and may convert to a permanent easement after construction."
Furthermore, Larson said, "Generally, they are reluctant to put any termination for perpetuity. But for landowners to protect themselves, there needs to be an end date on the easement. Also, landowners should consider adding a rental compensation with inflation clause."
Unfortunately, sometimes landowners aren't successful in opposing eminent domain declarations. In 2015, a judge in South Dakota granted the Dakota Access pipeline the right to survey the property of nearly two-dozen landowners who opposed the project. The company used eminent domain to access the landowners' property to survey it before the state's Public Utilities Comission had even had a hearing to determine if the pipeline could be built.
Nancy Stofferahn, a South Dakota landowner who had land condemned via eminent domain when the Dakota Access pipeline was put in, said landowners need to consider liability concerns and address them in the easement. This includes liability for any third-party subcontractors.
"We couldn't find an insurance company that would give us liability insurance with the pipeline. Eventually, we got the company to write their liability into our easement," said Stofferahn. "Landowners have to protect themselves. They need to be conscious of their own liability if something would happen on their land."
Additionally, Stofferahn suggests that landowners seek legal council before signing any documents concerning easements or compensation.
"Know your rights," said Stofferahn, "and think to the future. We made sure that our easement included a clause that prevented multiple pipelines."
Other issues to consider when negotiating an easement include the landowner's right of use. Consider all potential uses of the land and ensure that they will not violate the easement. Future uses may include the right to farm in or around the easement, graze livestock, conduct recreational uses, place structures or buildings and create roads or driveways. Building these potential uses into the easement can protect landowners' future uses of their land.
While you can't prevent an eminent domain case involving your land, you can be prepared for such an event by knowing your rights and the laws in your state.