Legal Alerts

Buy the Farm and CAPX2020: Or What Is A Taking?

Lindquist Gets Real: Real Estate Tips from Lindquist & Vennum

The Minnesota Supreme Court is currently considering a condemnation damages issue that arises because of the confluence of the following three vectors:

1. In the early 1970's, as a result of concerns about the effects of EMF radiation, Minnesota farmers began protesting installation of high voltage electric transmission lines across their property via easements acquired by the use of eminent domain. In response, in 1973 the state enacted Minn. Stat. 216E.12, commonly referred to as "Buy The Farm". Under Buy The Farm, if a utility attempts to acquire an easement across private land via eminent domain for the purpose of installing an electric transmission line with a capacity of 200 kilovolts or greater, the land owner can elect instead to require the utility to purchase the entire parcel.

2. In 2005, the United States Supreme Court issued its opinion in the case of Kelo v. City of New London, spurring a nationwide cri de coeur condemning the result (locally the Richfield Re-development of homes for an office campus for Best Buy Corp. was frequently cited as "Exhibit A" of the use of condemnation for taking private property for private re-development). Liberals and conservatives were united in agreement that Susette Kelo was handed a raw deal by the City of New London. In response to the case, states across the nation enacted reforms to their eminent domain laws. Minnesota was no exception. Among other changes enacted in this state, the legislature enacted the "minimum compensation" rule, codified in Minn. Stat. 117.187. Under the minimum compensation rule, the amount of damages payable to the property owner, "at a minimum, must be sufficient for [the] owner to purchase a comparable property in the community." The rule was designed to protect, among others, homeowners who had made significant investments into "for the rest of my life" level home improvements. Because these kinds of investments rarely yield a dollar-for-dollar increase in market value, a fair market value award in a condemnation would essentially strip from the owner all of the excess dollars invested into his property. The minimum compensation rule was designed to enable the property owner to remain in a similar quality of improvement after the taking.

3. At some point in the mid 2000's, a consortium of 11 utility providers began steps to pursue a project that came to be known as "CapX2020". According to their promotional web site, "CapX2020 is a joint initiative of 11 transmission-owning utilities in Minnesota and the surrounding region to expand the electric transmission grid to ensure continued reliable and affordable service. The new [345 kv] transmission lines will be built in phases designed to meet this increasing demand as well as to support renewable energy expansion." Permitting activity for CapX2020 began in approximately 2008. Construction began in approximately 2011 and is ongoing.

The three elements described above have converged in a case currently pending before the Minnesota Supreme Court, Northern States Power v. Aleckson, et al. In Aleckson, several property owners facing CapX2020 easement condemnations made "Buy The Farm" elections, a strategy that had been previously employed by other CapX2020 property owners. The property owners took the position that a "Buy The Farm" election transforms the easement case into a total takings case, entitling the property owners to all compensation available in such cases, including minimum compensation under Minn. Stat. 117.187.

NSP resisted this position, arguing that a "Buy The Farm" election is distinct from a total takings case because it is a voluntary election by the property owner. Thus, per NSP, the only compensation available to the landowners in such cases is the fair market value of their property.

The landowners prevailed at the trial court level (Stearns County District Court), and NSP appealed. The Court of Appeal, in an opinion issued by Judge Stauber, reversed the District Court, holding that, because a "Buy The Farm" election is a voluntary act by the property owner, such owner is not a "landowner who must relocate" as defined by the statute. Therefore, items such as minimum compensation are not available to such owner.

The matter is currently on appeal to the Minnesota Supreme Court. Oral arguments are on the Court's docket for April 3, 2013. In the meantime, a bill amending "Buy The Farm", SF 183, is currently pending before the Senate, with a companion bill before the House. Though there are slight differences between the House and Senate versions, and though of course both could be further revised, the focus of each is to make total takings damages (including minimum compensation) available to property owners who make a "Buy The Farm" election. Both bills enjoy bipartisan support and appear to have decent likelihood of being enacted. However, because laws cannot apply retroactively, it is questionable whether the law, if enacted, would affect the outcome of the matters consolidated in Aleckson. A favorable ruling by the Supreme Court, of course, would affect all cases since that would be a matter of interpretation of an existing law, not the creation of a new law.

In the meantime, CapX2020 matters continue to face property owners (currently, along the I-94 corridor, as well as in the Rochester area). If you own property in a CapX2020 area, it would be prudent to look on the CapX202 web site, or on related web sites, to see whether your property might in the future be a possible location of a CapX2020 easement. Property owners facing these cases have number of strategies with which they might be able to increase recovery. Property owners with concerns about a utility or governmental taking matter should consult with competent eminent domain counsel.

Lindquist Gets Real is a periodic publication of Lindquist & Vennum LLP and is intended to provide tips and basic information about real estate law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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