Avoiding Costly Litigation—How Utilities Should Approach Property Owners When Seeking to Acquire Land

Like it or not, property acquisition for utilities, especially through eminent domain, is changing. What once was an easy, efficient process is now being met with more frequent resistance from property owners.

In the past, almost all utility planning project work was done first and then presented to the appropriate regulatory body, which reviewed the submission and approved a project, including transmission routes and property acquisition. Once that process was completed, if the utility could not acquire the property through voluntary conveyance, the utility had the right to eminent domain. The eminent domain process usually involved very basic, if any, negotiations, and condemnation orders were generally entered quickly by courts.

COMMENTARY

This process left many property owners feeling bulldozed and without any say in how their property was treated. And since the right to own private property is a core tenet of our constitutional structure, we are now seeing a shift in property acquisition procedure. Utilities need to understand the shifting landscape to mitigate harmful litigation and delays.

The New Property Owner Approach

Recently, there has been a significant increase in property owners undertaking protracted challenges to eminent domain actions filed by utility companies, likely given the easy availability of information (and misinformation) on the internet. Utilities are seeing new arguments and courts are also allowing property owners more leeway to make arguments, including with full briefing and even sometimes allowing discovery.

It is highly likely that property owner strategies can—and will—be seen in opposition to numerous utility projects in the future, which could include both constitutional challenges, as well as procedural. We are also increasingly seeing special interest organizations, such as environmental or other groups, becoming involved to use property owners to advance their agenda. For example, special interest groups may fund property owners’ litigation to slow, and possibly stop, projects that they view as contrary to their goals.

As seen in several recent high-profile cases, such as the Constitution Pipeline, XL Pipeline, and Dakota Access projects, these matters no longer are as straightforward or easy as they were for decades. These challenges can increase costs and cause delays that affect both the profitability and viability of projects.

The New Utility Approach: Owner Engagement

Luckily, the solution for utilities responding to property owners is straightforward. Though it may seem daunting at first glance, collaborating closely with property owners can help keep projects on schedule and on budget, saving significant time and money in the long run.

The first step is simple—remember that while the utility is focused on the project, each individual property owner is more concerned about their home and their interests. We need to recognize property owners as individuals and try to understand their unique concerns and worries. Actively identifying and helping to alleviate these concerns at the upfront is the best way to avoid opposition and protracted litigation. This step is crucial, and utilities should engage with property owners as soon as possible.

Next, how you approach the property owner is just as important. The initial approach should not just simply seek to pay a specified sum for the property rights, operating under the assumption that the project will proceed exactly as planned. Instead, take time to address the property owner’s concerns and educate them on why certain fears may not be warranted. Honesty is the best policy, and these explanations need to be grounded in real, demonstrable facts.

Property owner concerns can cover a range of topics, from things like impacts to gardens and sheds, to fears about safety. For safety considerations, it is imperative that property owners feel heard and are thoroughly educated regarding the safety of the project. Our research has found that property owners understand the situation best when they are told that the utility has every reason to ensure infrastructure safety and maintenance, especially as disruptions can be costly to the utility. If the property owner is concerned about a structure on their property, incurring an upfront cost to relocate or replace something like a driveway, shed, or hedgerow, can save tens of thousands of dollars in litigation.

Individual outreach and early engagement may seem daunting due to the sheer number of property owners, but ultimately, engagement saves time and money. Further, owner engagement provides good public relations through word-of-mouth, as property owners who feel heard will tell their neighbors that the utility is reasonable. While proactive property owner collaboration will not eliminate all objections or litigation, working to provide early, meaningful engagement can reduce the number of objections and cases significantly. ■

—James M. Graziano ([email protected]) is a partner at Archer PC in Voorhees, New Jersey.