Calculation of Just Compensation In a Pennsylvania Federal Pipeline Condemnation Action
Business Law Articles
By Paul R. Yagelski, Esquire
Rothman Gordon
Pittsburgh, Pennsylvania
How is just compensation calculated in a federal pipeline condemnation action where the pipeline is located in Pennsylvania? Can a property be valued for a best use that is barred by current zoning designations? In Rover Pipeline LLC v. Rover Tract No. Pa WA HL-004.500T, 813 Fed. Appx. 740 (3rd Cir. 2020), the Third Circuit Court of Appeals addressed both of these questions.
In Rover Pipeline, the Federal Energy Regulatory Commission approved Rover’s plan to build a natural gas pipeline across Ohio, Michigan, West Virginia, and Pennsylvania. To build across private land, Rover would need a number of easements. Most of them were bought by negotiating with landowners, but not all landowners agreed. James and Diane Buchanan were one of those landowners.
The Buchanans own a 123.445-acre farm in Hanover Township, Pennsylvania. Rover planned to bury its pipeline across the middle of the Buchanans’ farm. Rover approached the Buchanans to negotiate a price for running its pipeline across their farm. The Buchanans resisted. Negotiations broke down, so Rover, who had eminent-domain power under the Natural Gas Act to bring condemnation actions to get easements, brought a condemnation action in the United States District Court for the Western District of Pennsylvania to secure two things: a permanent easement for the pipeline and a temporary easement for a few construction amenities; i.e., a temporary workspace at the site, road access, and other rights of way. The permanent easement would cut a 50-foot-wide slice right through the middle of the Buchanans’ farm, covering about two acres of their land.
Rover and the Buchanans were able to agree on a price for Rover’s initial right of entry, but there was still a bone of contention: what price was fair for the permanent and temporary easements. To end their gridlock, Rover moved to create a court-appointed commission to decide what compensation was just. See Fed. R.C.P. 71.1(a),(h)(2)(A). The District Court granted the motion and chose the Commission’s three members: two real-estate lawyers and a former Pennsylvania Court of Common Pleas judge.
The Commission calculated just compensation as the difference between the farm’s pre-taking and post-taking fair market values. The Commission took the farm’s pre-taking value ($790,048), which assumed that the farm could be developed in ways barred by land zoning rules, and subtracted its post-value ($419,213), for a difference of $370,335. After adding $4,224 for Rover’s temporary workspace easement and subtracting the $65,628 that Rover had already paid the Buchanans for its initial right of entry, the Commission set Rover’s final bill at $308,931.
The District Court reviewed the Commission’s findings de novo and adopted them in full. Rover appealed, arguing that the Commission and the District Court overestimated the farm’s pre-taking value and underestimated its post-taking value. In addressing Rover’s arguments, the Third Circuit first addressed how just compensation is calculated.