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Pipeline Easements, Part 2: Eminent Domain Damages

Pipeline Damages to my land in Eminent Domain

In our previous blog post, Pipeline Easements: Overview and Associated Costs, we discussed eminent domain authority and the costs associated with pursuing an eminent domain claim for just compensation.  In the second blog of our 2 part series on Pipeline Easements, I want to discuss the  eminent domain damages that a property owner is entitled to when determining just compensation for a pipeline easement.

The damages basically fall into three categories:

1.  The cost of the land that is being acquired by way of easement to hold the channel that the pipeline will be buried in. This value should be determined based upon the property’s highest and best use.
2. The loss of potential development
3. The stigma with regards to the potential for explosion particularly with regards to high pressure gas pipelines.

I’d like to focus my comments on the latter two as I feel these are the most important and complicated issues.  With regards to development potential, when a pipeline goes through a parcel, particularly a vacant parcel of land, and is installed in such a way as to carve up the property so that it makes it difficult to develop, the property owner will be entitled to receive compensation for several damages.  First, the property owner is entitled to the highest and best use value for the easement over the land where the pipeline is located; and second, they are entitled to receive compensation for the loss of development potential, if the placement of the pipeline will hinder development or significantly affect where improvement for future development can be placed.  This can create inefficiencies and other problems that drive the value of the remainder parcel lower than it was before the pipeline was installed.

The second aspect of the damages relate to the potential for explosions.  This is an emerging area with regards to pipeline easement eminent domain damages and up until a few years ago, had not been considered by courts anywhere. Recently, several courts have been willing to entertain the threat of explosion and the stigma resulting from that as an element of damages for consideration by a jury.  I think as more of these explosions occur and receive media attention, the public awareness to this problem will heighten and the detriment upon the impact of value to property is going to become greater and greater.

This will be particularly true with regards to development land where a high pressure gas pipeline is installed and the highest and best use for that property before the pipeline was installed was residential development.  The pipeline in place could make it very difficult for future development because the stigma surrounding gas explosions.  A developer might have to sell the residential lots for a steep discount if they can even be sold at all.

Typically, the condemning authority in pipeline easement cases will only offer compensation for the easement taking and not compensation for additional eminent domain damages.  Therefore, if you’re a property owner with vacant or development land that is affected by a pipeline project, I highly recommend you consult with an eminent domain attorney prior to signing off on an offer from the condemning authority.


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