The Constitution Pipeline & Partial Takings

For those of you not in the New York area, the Constitution pipeline is a proposed project to build  a  124-mile transmission pipeline connecting natural gas supplies in northern Pennsylvania with major northeastern markets. The pipeline is designed with the capacity to transport 650,000 dekatherms of natural gas per day (which is enough to serve 3 million homes, according to the Constitution Pipeline website.) The pipeline itself is 30 inches wide and will extend from Susquehanna County, Pa. to Schoharie County, New York. Construction is expected to begin this summer.

What will this mean for property owners who may be impacted by the construction of the pipeline on their property?

Condemning authorities do not always take an entire parcel in an eminent domain proceeding.  Indeed, in the Court of Claims, the majority of the appropriation claims are partial takings arising in the context of a highway project.  Partial takings may also occur in the context of takings for sewer lines, electrical transmission lines, or as is the subject of recent nationwide proposals, pipelines.

As a general rule, the measure of damages in a partial-taking case is the difference between the fair market value of the whole property before the taking and the fair market of the remainder after the taking.  Acme Theatres Inc. v. State of New York, 26 NY2d 385 (1970); Diocese of Buffalo v. State of New York, 24 NY2d 320, 323 (1969).

The fact that there was a partial taking does not automatically mean that there has been damage to the remainder. A two-step appraisal process is required: First, the entire property is valued based on its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time.  Chemical Corp. v. Town of East Hampton, 298 AD2d 419, 420 (2d Dept 2002).  Then direct damages are calculated by valuing the property which was acquired.  The next part of the formula is valuing the remainder which results after the partial taking.  This is where the appraiser will determine whether or not the remainder has sustained consequential damages which are damages occasioned to the property remaining (the remainder), not only by reason of the direct taking, but also by virtue of the use to which the appropriated property is put by the condemnor.   

 

Severance Damages v. Consequential Damages

Severance damages are damages that occur simply because the property acquired is no longer a part of what was once the whole property, it has been severed.  The property may have been improved with a structure which may have been partially demolished.  Obviously, the part not taken has lost value, probably all of its value.  A taking may cause the remainder to be of a size that no longer can be used under zoning laws for its highest and best use, or it may have been left with unsuitable access to a street for its highest and best use.

In Priestly v. State of New York, 23 NY2d 152 (1968), the court defined ‘suitable’ as meaning “that which is adequate to the requirements of or answers the needs of a particular object.  The concepts are not mutually exclusive and, therefore, a finding that a means of access is indeed circuitous does not eliminate the possibility that that same means of access might also be unsuitable in that it is inadequate to the access needs inherent in the highest and best use of the property involved.”  Priestly at 156.

True consequential damages on the other hand come from the manner or use that the property directly taken is put to by the condemnor.  Some examples: South Buffalo Ry. Co. v. Kirkover, 176 NY 301 (1903) (railroad use); Dennison v. State of New York, 28 AD2d 28, aff’d 22 NY2d 409 (1968) (damages to remainder caused by loss of view and noise); Criscuola v. Power Authority of the State of New York, 81 NY2d 649 (loss of value to remainder caused by high voltage power line).  Judge Joseph Bellacosa wrote in Criscuola that, “evidence of fear in the marketplace is admissible with respect to the value of property taken without proof of the reasonableness of the fear.”  Criscuola at 652.

In Criscuola, the New York Court of Appeals ruled:

  1. There should be no requirement that the claimant must establish the reasonableness of a fear or perception of danger or of health risks from exposure to high voltage power lines.
  1. Whether the danger is a scientifically genuine or verifiable fact should be irrelevant to the central issue of its market value impact.

A claimant, however, is not relieved from giving any proof to establish his claim and just compensation damages.  Criscuola v. PASNY, mandates that a claimant must still establish some prevalent perception of a danger emanating from the objectionable condition.  The Court of Appeals stated, ‘No witness, whether expert or non-expert, may use his or her personal fear as a basis for testifying about fear in the marketplace.  However, any other evidence that fear exists in the public about the dangers of high voltage lines is admissible.’  It is submitted that the same theory of consequential damages will be appropriate to a partial taking for a gas pipeline.

For more information on this topic, be sure to check out Michael Rikon’s column in the New York Law Journal, due out next month.

Posted in Constitution Pipeline, Energy Companies, New York, Partial Takings, Published Articles, Valuation
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