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Tennessee Gas Pipeline Co. v. Permanent Easement for 1.7320 Acres and Temporary Easements for 5.4130 Acres In Shohola Township

United States District Court, M.D. Pennsylvania

February 24, 2014

TENNESSEE GAS PIPELINE COMPANY, Plaintiff,
v.
PERMANENT EASEMENT FOR 1.7320 ACRES AND TEMPORARY EASEMENTS FOR 5.4130 ACRES IN SHOHOLA TOWNSHIP, PIKE COUNTY, PENNSYLVANIA, TAX PARCEL NUMBERS 49.00-1-15, 49.00-1-19, 49.00-1-20 AND 62.00-01-57, et al., Defendants.

MEMORANDUM

A. RICHARD CAPUTO, District Judge.

Plaintiff Tennessee Gas Pipeline Company ("Tennessee") commenced this condemnation action under the Natural Gas Act, 15 U.S.C. § 717 et seq., to acquire a permanent easement and temporary easements (the "Rights of Way") on property owned by Fox Hollow Estates, L.P. ("Fox Hollow") in Shohola Township, Pike County, Pennsylvania to construct new pipeline and compressor facilities and modify existing facilities on its existing 300 Line as part of Tennessee's 300 Line Project (the "Project"). Tennessee and Fox Hollow agreed to Tennessee's immediate possession of the Rights of Way to construct the Project upon the posting of a bond as security for just compensation. After an order was entered granting Tennessee possession of the Rights of Way upon the posting of a bond, Tennessee posted a bond to perfect its possession of the Rights of Way. Tennessee has since completed construction of the Project on the Property. The only unresolved issue in this action is a determination of just compensation owed to Fox Hollow by Tennessee. A two day non-jury trial on this issue was held in November 2013. Set forth herein are the Court's factual findings and legal conclusions pursuant to Rule 52 of the Federal Rules of Civil Procedure.

I. Background

A. Relevant Factual Background

Defendant Fox Hollow owns 298.97 acres of real property in Shohola Township (the "Township"), Pike County, Pennsylvania, described in a Deed dated May 23, 2005, recorded in the Office of Recorder of Deeds of Pike County at Book 2112, Page 1341 (the "Deed"), and known as Tax Parcel Numbers 49.00-1-15, 49.00-1-19, 49.00-1-20, and 62.00-01-57 (the "Property"). By way of an agreement granting an easement in 1955 to Tennessee's predecessor, Tennessee Gas Transmission Company, Tennessee owned an existing easement and right of way on the Property. That easement is fifty (50) feet wide and grants Tennessee the right to operate and maintain a single pipeline.

Fox Hollow acquired the Property on May 23, 2005 for $1, 875, 000.00 for purposes of subdividing it and selling free-standing single homes.

On May 14, 2010, Tennessee received a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission ("FERC"), Docket No. CP09-444-000, 131 FERC ¶ 61, 140 (2010) (the "FERC Order"), to construct a new pipeline and compressor facilities and modify existing facilities on its existing 300 Line as part of Tennessee's 300 Line Project. In order to construct the Project, Tennessee required additional permanent right of way and temporary workspace on the Property.

Tennessee thus commenced this condemnation action seeking to condemn permanent rights of way and easements, twenty-five (25) feet in width containing 1.732 acres, and temporary easements of 5.413 acres (the "Rights of Way"). The Rights of Way were necessary to construct, operate, and maintain the pipeline approved in the FERC Order for the Project.

The Rights of Way are adjacent to or co-existing with the existing fifty (50) foot wide easement on the Property. As stated, the Rights of Way include an additional permanent right of way and easement of 1.732 acres, temporary workspace and easements of 5.413 acres, and an overlay easement for the new second pipeline in the pre-existing easement area of 1.886 acres.

As part of its application for a certificate of public convenience and necessity for the Project, Tennessee submitted alignment sheets depicting the pipeline construction route. The Project included the construction of eight pipeline loop segments. The Property is on the construction route for Loop 323 as reviewed and approved by the FERC.

Pursuant to a stipulation between Tennessee and Fox Hollow, the Court entered an order granting Tennessee possession of the Rights of Way upon the posting of a bond. Tennessee subsequently perfected its right to possession of the Rights of Way, and a certified copy of the order granting Tennessee possession of the Rights of Way was recorded in the Office of the Recorder of Deeds for Pike County, Pennsylvania as Instrument -00000810 at Deed Book 2409 Page 2512. As a result of the taking of the Rights of Way, Tennessee's permanent easement and right of way on the Property increased from fifty (50) to seventy-five (75) feet in width and now contains to two pipelines.

As part of its Implementation Plan for construction of the Project, Tennessee submitted an Environmental Construction Plan for Pennsylvania to the FERC. The FERC reviewed and approved the Environmental Construction Plan for Pennsylvania by issuing a Notice to Proceed with construction in Pennsylvania. The restoration that Tennessee is required to perform by the FERC on the Property is set forth in the Environmental Construction Plan.

Tennessee has since completed construction of the Project on the Property. In addition, Tennessee has completed its restoration work on the temporary easement. As such, just compensation for the taking of the Rights of Way is ripe for determination. Accordingly, a non-jury trial on just compensation was held on November 20 and 21, 2013.

B. Procedural History

On January 5, 2011, Tennessee filed a Complaint in Condemnation in this action seeking to condemn permanent rights of way and easements, twenty-five (25) feet in width containing 1.732 acres, and temporary easements of 5.413 acres. On February 28, 2011, Tennessee and Fox Hollow entered into a Stipulation Regarding Notice Pursuant to Fed.R.Civ.P. 71.1(e)(1) and Possession (Doc. 17), whereby the parties agreed to the entry of an order granting Tennessee immediate possession of the Rights of Way to construct the Project upon the posting of a bond as security for just compensation. Fox Hollow also reserved "the right to challenge the amount of just compensation being offered by Tennessee and present evidence at the trial on compensation[.]" On March 4, 2011, the Court entered the stipulated order granting Tennessee possession of the Rights of Way upon the posting of a bond. (Doc. 19.) Tennessee posted a bond on March 15, 2011 to perfect its right to possession of the Rights of Way. (Doc. 20.)

On May 10, 2013, Tennessee filed a Motion to Open Case to Determine Just Compensation. (Doc. 22.) Tennessee's motion was granted, and the case was re-opened for determination of just compensation. (Doc. 26.)

Following the close of discovery, and prior to trial, the parties filed motions in limine. (Docs. 30; 32; 34.) In particular, both Tennessee and Fox Hollow filed motions seeking the exclusion of evidence not relevant to the determination of just compensation. (Docs. 30; 32.) Tennessee advanced the position that federal law governs the determination of just compensation in this action, while Fox Hollow argued for application of Pennsylvania law to determine the amount of compensation due for the taking of the Rights of Way. Because the matter was being heard without a jury, the parties' motions were deferred to trial.

C. Trial Testimony

1. Testimony Presented by Fox Hollow

At trial, Fox Hollow presented the testimony of Stephen Sameroff ("Sameroff"), the principal of Fox Hollow, John McChesney ("McChesney"), a real estate appraiser, Michael Weeks ("Weeks"), a civil engineer, and James Leary ("Leary"), a consulting forester.

According to Sameroff, Fox Hollow acquired the Property on May 23, 2005 for $1, 875, 000.00 for purposes of subdividing it and selling free-standing single homes. Following the purchase of the Property, Fox Hollow had a sketch plan prepared and the plan was submitted to the Township. Fox Hollow also had a major preliminary subdivision plan prepared that was submitted to the Township. Additionally, soil erosion and sedimentation control plans were prepared and submitted to the Township and the Department of Environmental Protection. A non-point discharge elimination system permit was submitted to the Pike County Conservation District, and sewage planning was submitted to the Department of Environmental Protection.

Sameroff testified that Fox Hollow stopped pursuing the subdivision project in 2007 or 2008 because of the recession. Moreover, Sameroff testified that Fox Hollow never received preliminary or final subdivision approval for the Property, nor did Fox Hollow ever receive preliminary or final land development approval for the Property.

In view of Tennessee's taking of the Rights of Way, Sameroff testified, in his opinion as landowner of the Property, that Fox Hollow incurred $300, 000.00 in damages. Sameroff attributed the damages to additional costs to remediate the Property, re-engineer the Property, and develop new storm water plans. Sameroff also testified that the addition of a second pipeline diminished the value of the Property exponentially.

Fox Hollow also presented the testimony of McChesney, a real estate appraiser. In appraising the Property, McChesney applied a sales comparison approach. McChesney concluded that fair market value of the Property before the taking of the Rights of Way was $1, 495, 000.00, which amounted to a per acre value of $5, 000.00. McChesney applied the same process to the Property after the taking, and he concluded that the fair market value of the Property after the taking of the Rights of Way was $1, 406, 000.00. The per acre value after the taking, according to McChesney, was $4, 700.00. Thus, McChesney found the fair market value of the Property to have decreased by $89, 000.00 as a result of the taking of the Rights of Way. Of that $89, 000.00, McChesney attributed $69, 000.00 to indirect damages and $20, 000.00 to direct damages. In making his evaluation, McChesney did not consider the cost of re-engineering the Property, building new crossings over the pipeline, or restoring the temporary workspace.

Fox Hollow next presented the testimony of Weeks, a civil engineer. Weeks testified that as a result of the taking of the Rights of Way, it would cost Fox Hollow $34, 930.00 to construct a crossing over the new pipeline. Thus, he estimated that the cost of two additional crossings over the new pipeline would be $69, 860.00. Weeks also estimated that it would cost Fox Hollow $32, 000.00 to re-configure and re-engineer the plans to accommodate Tennessee's expanded easement.

Lastly, Leary testified with respect to a timber appraisal he prepared for Fox Hollow. According to Leary, the merchantable value of the timber removed from the Property was $6, 325.72. Leary further estimated that 155 trees would be needed to replace the removed trees, which he concluded would cost $6, 885.00. And, at a replanting cost of $290.00 per tree, Leary estimated the cost of replanting the temporary workspace to be $44, 950.00. Thus, Leary testified that Fox Hollow suffered $58, 160.72 in damages.

2. Testimony Presented by Tennessee

Tennessee presented testimony from two witnesses at trial, Daniel Gredvig ("Gredvig"), director of right of way for the eastern division of Kinder Morgan, and Richard Drzewiecki ("Drzewiecki"), a real estate appraiser.

Gredvig testified that Tennessee has completed construction on the Property. In addition, Tennessee has completed its restoration work on the temporary workspace. Gredvig testified that prior to Tennessee's use of the temporary easement it was fully wooded. Now, however, despite having completed restoration, there are no trees on the temporary easement. Rather, Tennessee graded, seeded, and mulched the temporary workspace. Moreover, Gredvig indicated that after construction is completed and the temporary easement restored, Tennessee is responsible only for the maintenance of the permanent easement.

Tennessee also presented the testimony of Drzewiecki, a real estate appraiser. Drzewiecki was retained by Tennessee to perform an analysis of comparable sales in connection with Tennessee's 300 Line Project. According to Drzewiecki, the fair market value of the Property before the taking of the Rights of Way was $1, 439, 200.00, resulting in a per acre price of $4, 815.00. After the taking of the Rights of Way, Drzewiecki determined the fair market value of the Property to be $1, 421, 100.00, amounting to a price of $4, 755.00 per acre. Thus, Drzewiecki concluded that the difference in the fair market value of the Property before and after the taking was $18, 100.00. And, Drezwiecki attributed the entire $18, 100.00 to direct damages, as he found that there was no indirect damages as a result of the taking of the Rights of Way. Instead, he testified that the indirect damages occurred in 1955 when the first pipeline was placed across the Property, because, based on the information available, he had no proof that severance damages resulted from the taking of the additional twenty-five (25) foot easement.

D. Post-Trial

At the conclusion of the trial, both parties were given the opportunity to file post-trial submissions. Both parties timely submitted proposed findings of fact and conclusions of law. (Docs. 58; 62.) Having considered the testimony of witnesses and evidence admitted at trial, as well as the submissions of the parties, I will analyze the evidence and the law and make Findings of Fact and Conclusions of Law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

II. Legal Standard

Rule 52 of the Federal Rules of Civil Procedure provides, in pertinent part:

(a) Findings and Conclusions.

(1) In General. In an action tried on the facts without a jury or with an advisory jury, the court must find the facts specially and state its legal conclusions of law separately. The findings and conclusions may be stated on the record after the close of the evidence or may appear in an opinion or a memorandum of decision filed by the court. Judgment must be entered under Rule 58....

Fed. R. Civ. P. 52(a)(1). Pursuant to Rule 52(a), the Court's decision must "be supported by subordinate factual findings." Giles v. Kearney, 571 F.3d 318, 322 (3d Cir. 2009) (citing O'Neill v. United States, 411 F.2d 139, 146 (3d Cir. 1969)). "This is a mandatory requirement." In re Frescati Shipping Co., 718 F.3d 184, 196 (3d Cir. 2013). While the Court is not permitted to "view the evidence through a particular lens or draw inferences favorable to either party, " EBC, Inc. v. Clark Bldg. Sys., Inc., 618 F.3d 253, 272 (3d Cir. 2010) (citing Ritchie v. United States, 451 F.3d 1019, 1023 (9th Cir. 2006); Giant Eagle, Inc. v. Fed. Ins. Co., 884 F.Supp. 979, 982 (W.D. Pa. 1995)), the Court should "make determinations of witness credibility where appropriate." Clark Bldg., 618 F.3d at 273 (citing Parker v. Long Beach Mortg. Co., 534 F.Supp.2d 528, 535 (E.D. Pa. 2008); Falter v. Veterans Admin., 632 F.Supp. 196, 200 (D.N.J. 1986)).

III. Discussion

A. The Natural Gas Act

Tennessee commenced this condemnation action under the Natural Gas Act, 15 U.S.C. § 717 et seq. As set forth in § 717(a) of the Natural Gas Act, "it is declared that the business of transporting and selling natural gas for ultimate distribution to the public is affected with a public interest, and that Federal regulation in matters relating to the transportation of natural gas and the sale thereof in interstate and foreign commerce is necessary in the public interest." ...


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