HJR 491/SJR 271

Joint Subcommittee Studying Compensation to Virginia Citizens Whose Properties Are Taken through Eminent Domain

July 21, 1999, Salem

The scope of the joint subcommittee's examination of Virginia's eminent domain laws is broad enough to encompass all issues pertaining to the procedures and compensation paid for condemnations of property. However, recitals in the resolutions establishing the joint subcommittee allege inequities in aspects of condemnations by utility companies for the construction of electric transmission lines. The study's second meeting was dedicated to receiving testimony dealing with condemnations for utility lines.

Health Effects of High Voltage Transmission Lines

The General Assembly has required the State Health Department to monitor the health effects of high voltage transmission lines since 1984. Since then the department has issued 13 reports summarizing ongoing research on this topic. The results of recent studies, including the 1999 report by the National Institute of Environmental Health Sciences, on health effects from exposure to power-line frequency electric and magnetic fields (EMF) concluded that the scientific evidence suggesting that EMF exposures pose any health risk is weak. While the support from individual epidemiological studies is weak, the studies demonstrate a fairly consistent pattern of a small, increased risk with increasing exposure. However, the lack of connection between the human data and experimental data severely complicates the interpretation of these results. EMF exposure cannot be recognized as entirely safe because of weak scientific evidence that exposure may cause a leukemia hazard, though this finding is labeled "insufficient to warrant aggressive regulatory concern."

Other studies of the possible health effects neither prove nor disprove a link between cancer and EMF. Of 130 occupational studies, 57 showed an increased risk of cancer while 73 showed no increased risk. The current state of knowledge about the health effects of EMF was summarized as follows: While some epidemiological studies imply a possible link between EMF and certain types of cancer (notably leukemia and brain cancer), other studies tend to impugn such a relationship. Studies incriminating exposure to EMF as a cause of cancer are only suggestive, and the results reported in many studies are devoid of statistical significance. The reported increases in cancer incidence may be due to chance alone or to some unidentified factor other than EMF. There is no unifying pattern with respect to cancer type or site.

Moreover, the extent to which high voltage transmission lines contribute to daily exposure to EMF is difficult to assess. Other sources--wall wiring, light fixtures, and other appliances--also produce EMF, and cumulative exposure from these sources may far exceed that from transmission lines. At a distance of 100 feet from transmission lines, exposure from the lines falls into background levels of EMF.

Based on the current state of knowledge, it is not possible to state with any certainty that there is a human health risk associated with exposure to EMF or that there is a risk associated with living near high voltage transmission lines. As we do not know what the health effects of EMF are or what levels of EMF are harmful, a safe distance from high voltage transmission lines cannot be determined. It was noted that it is difficult to "prove the negative" of establishing that EMF has no adverse effects on human health.

Though the issue of whether EMF adversely affects human health is beyond the scope of the joint subcommittee's study, the existence of public fears of power lines, and the reasonableness of any such fears, are raised in litigation involving damages to the residue of parcels over which power line easements are acquired. The approach adopted in a minority of states holds that fear of EMF can never be an element of damages. Several states have adopted an intermediate view that an award is permissible where fear depresses property values, as long as the fear is reasonable. The majority view is that reasonableness of the fear is irrelevant and that an award is permissible where fear depresses a property's value. Virginia's position on this issue is unclear. In Chappell v. Virginia Electric & Power Co. the court left open the question of the proper view regarding compensability for damages caused by prospective purchasers' fears of power lines.

Valuation Issues

The president-elect of The Appraisal Institute proposed that the public's fear of power transmission lines, whether or not it is rational or scientifically supportable, be considered as a factor in determining a property's fair market value. Fair market value is the price which one, under no compulsion to sell, is willing to take for property and which another, under no compulsion to buy, is willing to pay. Transmission lines have a greater impact on valuation when a property's highest and best use is for residential purposes.

Providing full compensation in a condemnation case involves two calculations--the market value of the rights being acquired by the condemnor, and the resulting reduction in value to the remainder of the condemnee's land. Appraisals in power line cases are complicated by the fact that the interest acquired by the condemnor usually is an easement rather than the fee simple interest. As a result, the owner is allowed to do anything he wants to in the easement area as long as he does not interfere with the easement holder's rights. The extent to which the owner will be allowed to use his remaining interests in the right-of-way will affect the amount of compensation to which he is entitled.

In many jurisdictions, assessing the severance damages, or reduction in value of the remainder of a parcel, in a power line easement condemnation case involves the public's fear of sustained exposure to EMF. In Florida, there is no demonstrable impact beyond 250 feet from a power line, yet the public's fear exists beyond that distance. The diminution in value from power lines can be illustrated in contracts to purchase land, which have negotiated values for acreage that vary according to proximity to the lines. A property's liquidity and its highest and best use are also affected by proximity to power lines.

The Appraisal Institute representative recommended that in a taking for a power transmission line where an expert witness' opinion meets the applicable burden of proof, based on comparable sales and market analysis, and is not speculative, then full compensation to the condemnee should include loss in value attributable to fear. Otherwise, the property owner will be forced to bear a portion of the cost of the property's acquisition. When asked whether data on values should deal with realities rather than perceptions, he contended that people's' perceptions count in determining fair market value. Prices paid in comparable transactions reflect the perceptions of both the buyers and sellers. The market, he contended, is ultimately rational in the way it fixes values of property.

He expressed amazement at two aspects of Virginia's condemnation process: the absence of an allowance for payment of expert witnesses or attorneys and the method of selecting commissioners to determine just compensation. Another issue raised during his testimony involves "condemnation blight," which is the phenomenon of neighborhood deterioration that follows designation of an area that will be condemned in the future. During the wait for the condemnor to act, values decline as owners become reluctant to invest in properties and prospective buyers are unwilling to buy the land.

Critique of the Condemnation Process

The ownership of property gives citizens power, according to a Florida attorney. A system that allows condemnors to use the powers of the state against individual landowners upsets the system of checks and balances contemplated by the Founding Fathers. Eight issues were identified for consideration by the joint subcommittee which, if adopted, would help ensure that individual condemnees are not forced to pay more than other citizens for a project requiring exercise of the eminent domain power.
  1. Speedy trials will ensure that condemnors do not use delays to coerce landowners into accepting less than the property's fair market value.
  2. Jury trials will ensure that one side does not have greater access to a favorable result than the other.
  3. Mutual discovery by the parties, with an exchange of appraisals, will help avoid "trial by ambush."
  4. Mandatory, nonbinding mediation in valuation disputes will result in settlements in most cases, thereby saving time and money.
  5. Payment of the condemnee's reasonable appraiser's fees in all cases, and of his reasonable attorney's fees if the amount awarded exceeds the condemnor's final offer, will allow landowners to participate on an equal footing with the government in compensation disputes.
  6. Allowing any factor that causes the fair market value of residual property to decline in value, including fear of EMF and effects of visual blight, should be compensable.
  7. Condemnors should be required to compensate landowners whose property is not taken if condemnations of nearby property devalue their land by damaging their views, to the same extent as if the condemnors were taking a scenic easement.
  8. If a business cannot be relocated to a new site and damages are otherwise unavoidable, its owner should be compensated for the loss of his business enterprise.

Effect of Electric Utility Restructuring Act

A representative of Virginia Power advised the joint subcommittee that the restructuring of Virginia's electric utility industry will limit the circumstances under which public service corporations providing electricity will be able to exercise the power of eminent domain. Under the Electric Utility Restructuring Act, the generation component of the electric industry will be deregulated effective January 1, 2002. On and after that date, the right of eminent domain may not be exercised in conjunction with the construction or enlargement of any utility facility whose purpose is the generation of electric energy. The generation and distribution of electricity will continue to be regulated by the SCC, and the restructuring law makes no changes in the eminent domain powers utilities can exercise for expanding or improving transmission and distribution facilities. Though the restructuring of the electric utility industry has been compared to the restructuring of the telecommunications industry, the new suppliers and marketers of electricity will not be considered public utility corporations and thus will not have the power of eminent domain. By contrast, competitive local exchange carriers are certificated by the SCC and will have the same condemnation powers as other public utility corporations.

Perspectives of Electric Utility Companies

Virginia Power
According to Virginia Power, the company's compensation policies and its use of the eminent domain power are working reasonably well, and the property owners the company has dealt with think it is a fair process. Power line routes are chosen to have the least impact both on the environment and on the community. Existing facilities and rights-of-way are used whenever possible and routes must be approved by state or local government bodies before construction begins.

The company is able to negotiate agreements for easement acquisition with the overwhelming majority of owners. In recent years, between three and five percent of the right-of-way needed for transmission lines has been acquired by condemnation, and many of these condemnations were "friendly" cases where court proceedings were necessary to resolve title defects, unknown heirs, or other legal complications. Landowners are offered the difference between the value of the property before and after the taking occurs, with adjustments reflecting that the owner can continue to use the easement site for limited purposes. To avoid ill will, additional expenses, and inconvenience, the company prefers to negotiate with a property owner until reaching a mutually beneficial agreement. In determining just compensation, some compensation is paid for reasonable buffer areas on either side of the right-of-way. The company provides consideration for small, unusable parcels created by the taking.

When the company must exercise the power of eminent domain, the law is designed to protect property owners as well as the utility. Court-appointed commissioners ensure that just compensation is provided. While eminent domain is used only as a last resort, it is available when needed to protect the public and ensure the reliable transmission and distribution of electricity. Without this power, a small group of property owners could jeopardize customers' rights to efficient service.

In response to a question from the panel, the representative stated that Virginia Power has no position on the issue of whether condemnors should be required to pay condemnees' fees for attorneys and appraisers. He cited recent legislation requiring condemnors to include an explanation for the basis of their bona fide offer to purchase property as providing balance to the process. He queried whether any provision for payment of the other side's fees should apply reciprocally when the condemnee is awarded less than the amount of the condemnor's final offer.

The Virginia president for American Electric Power lauded the company's long record of acting responsibly in acquiring power line rights-of-way. AEP has had to acquire through condemnation less than five percent of the transmission line easements acquired over the past 25 years. During that period, AEP has constructed 318 miles of transmission lines in Virginia at line voltages of 138 kV and above. Easements have been acquired from 1,609 property owners. Of this total, 54 were acquired by condemnation proceedings. Easements for 765 kV transmission lines were obtained from 714 property owners, of which 42 involved condemnation proceedings. Because the Eminent Domain Act balances the rights and interests of affected landowners with those of public and private agencies that must build facilities, the joint subcommittee was urged to give careful consideration to any changes to the act that might be recommended during the course of its study.

SJR 271 and HJR 491 contain recitals which purport to establish that concerns and problems exist which justify the need for a study and create an expectation of reform. The validity of the premises in some of the "Whereas" clauses was questioned. One such premise is that the location of electric power transmission lines within the viewshed of parcels devalues the parcels even when located outside the line's right-of-way. To refute the perception that such properties are devalued by locations within sight of transmission lines, AEP cited the U.S. Forest Service's 1996 draft environmental impact statement (DEIS) for AEP's current 765 kV line proposal.

The procedure by which AEP acquires the necessary rights-of-way for the construction of transmission lines begins with an application to the SCC for a Certificate of Public Convenience and Necessity which states the reasons for the line's construction and the preferred and alternate corridors for its route. For a 765 kV line route approved by the SCC, a 1,000-foot-wide corridor is identified, within which the utility may work with landowners to precisely identify the line and its 200-foot-wide right-of-way. Once the precise location is determined, the utility commences to acquire the right-of-way. After determining the owners of the affected parcels, the company contacts them to obtain permission to conduct a survey. Sales of comparable parcels are reviewed to arrive at a fair market value. The difference in the fair market values of the parcel before and after the installation of the facility is used as a guideline for determining what AEP should offer to pay for the easement. AEP tries to evaluate each property on the basis of its unique features, taking into account all relevant factors that may affect the value of the requested right-of-way.

If AEP is unable to reach an agreement with a property owner, it will retain the services of an independent licensed appraiser to perform a market analysis to aid in determining the value of the easement. His analysis will be conducted completely independently of that done by AEP's own value analysis. If he concludes that the value is greater than that initially estimated by the utility, AEP will re-contact the owner and offer the higher amount. If it is less, the company will renew the higher first offer. This process has allowed AEP to acquire more than 95 percent of the needed easements by means of negotiations with property owners.

If this voluntary bilateral process fails, the company will start the condemnation process after first making a bona fide but ineffectual effort to acquire the easement. This "final offer" affords a final opportunity for a voluntary purchase. The owner is given a written statement explaining the factual basis for the offer, with the final written offer confirming what AEP is offering in exchange for the easement and conveying the message that the next step is for the parties to engage in a condemnation proceeding. If it is rejected, the condemnation process is initiated.

AEP varies its regular procedure to address special circumstances. For example, when acquisition of an easement would so affect the property as to leave very little utility for the owner, AEP will acquire the fee simple interest in the land which is affected by the proposed power line. In addition, where landowners desire, AEP purchases homes when any part of the home lies within 100 feet of the edge of the 200-foot-wide right-of-way. In such cases the company will also offer to buy the entire parcel at the landowner's request. A third option provides for the company to acquire and pay for an easement, with the owner remaining in the home. If within a year after the line is energized the owner decides that he or she does not want to continue to reside in the home, AEP will purchase the dwelling and land at its fair market value, less any sum already paid for the easement. Finally, AEP will accommodate a landowner's reasonable request to relocate the dwelling to another location on the landowner's property, to the extent feasible. Other concerns with which the company will work with owners include interference with radio and television reception and static shocks.

Electric Cooperatives
A spokesman for the Virginia, Maryland & Delaware Association of Electric Cooperatives advised the joint subcommittee that all of the cooperatives in the Commonwealth, except for Old Dominion Electric Cooperative (ODEC), were distribution cooperatives. As such, they did not build or operate transmission lines. ODEC does not own any transmission facilities, and relies on the facilities of other utilities for transmission of its generated and purchased power. The distribution cooperatives have had no need to exercise the eminent domain power to bring energy to their retail customers.

Sierra Club's View of Utility Deregulation

The director of the Virginia Chapter of the Sierra Club cautioned the joint subcommittee that the compensation provided to property owners should be examined closely. With the passage of the Electric Utility Restructuring Act, the Commonwealth will be exercising its eminent domain power to aid companies in getting their power to customers in other states. As long as a utility company can condemn property to build a power transmission line without paying full compensation to its owner, building new transmission lines will be more attractive than other alternatives. The new lines could adversely affect the region's tourism industry. He suggested that a higher threshold be adopted for approval of transmission lines in the wake of electric utility deregulation. Before approving the exercise of eminent domain powers, he suggested that the SCC should compel utilities to investigate the possibility of retrofitting or expanding the capacity of existing lines.

Next Meeting

The joint subcommittee will hold a business meeting at George Mason University's Prince William campus in Manassas on August 24 at 2:00 p.m. The meeting will address issues relating to highway condemnations. A public hearing will follow the business meeting at 7:00 p.m.

The Honorable Madison E. Marye, Chairman
Legislative Services contact: Franklin D. Munyan