Minnesota utilities must pay minimum compensation, relocation under “buy the farm” law

The Minnesota Supreme Court on May 29 ruled that property owners who elect to have a utility buy their property under the state’s “buy the farm” law are in fact “displaced persons” entitled to minimum compensation and relocation assistance under the state’s eminent domain laws.

Under the “buy the farm” law passed in 1977, certain landowners whose property is subject to an easement for a transmission facility of 200 kV or higher can elect to have the utility buy his or her entire property, not just the portion required for the right-of-way (ROW) or easement. However, utilities were exempted from several sections of the state’s eminent domain laws and took the position that, while the taking of an easement was not voluntary on the part of the property owner, the decision to have the utility buy the entire property was the owner’s choice.

The 15-page Supreme Court ruling, which stems from oral arguments heard April 3, overturns an August 2012 decision in which the state Court of Appeals agreed that three landowners who made elections to have Xcel Energy’s (NYSE:XEL) Northern States Power (NSP) buy their entire parcels of property were not entitled to minimum compensation or relocation assistance.

The Court of Appeals reasoned that appellants did not meet the requirement of being owners who “must relocate” because they had the option to remain on their property after NSP sought to condemn the easements, but instead chose to expand the condemnation under the “buy the farm” law. In rendering its ruling, the appeals court relied upon a federal regulation that specifically exempts a person who is not required to relocate permanently as a direct result of a project.

The Supreme Court noted that the dispute presented a “question of statutory interpretation,” as the Court of Appeals and Supreme Court rulings relied upon interpretations of the federal relocation act. That act is a prerequisite to receiving certain forms of relocation assistance under Minnesota law.

The high court disagreed with the appeals court’s interpretation of the federal regulation, stating that the language of Title 42 of the United States Code defining a “displaced person” was unambiguous.

“Any person who moves from real property . . . as a direct result of a written notice of intent to acquire or the acquisition of such real property in whole or in part,” is a displaced person, according to federal law. Minnesota law adopts several definitions contained in Title 42, including that of a “displaced person,” the Supreme Court noted.

The high court rejected as “unpersuasive” NSP’s argument that owners who make an election to have the utility buy their property “do not move as a ‘direct result’ of an acquisition because their choice to make an election is an intervening cause of their move.”

Further, the court noted that the section of the Code of Federal Regulations that NSP cited as exempting property owners from qualifying as a “displaced person” applied only to persons who are displaced from their property for a year or less.

In summary, the Supreme Court said property owners “satisfy the condition of being owners who ‘must relocate’ … and the definition of ‘displaced persons’,” and are therefore entitled to minimum compensation and relocation assistance.

For its part, NSP has been paying market rate for properties purchased under the “buy the farm” law, an Xcel Energy spokesperson told TransmissionHub May 29.

Now, however, it will be required to pay an amount “sufficient for the owner to purchase comparable property in the community,” which could be significantly above market rate.

“If the owners [of a farm] say the only farm nearby is going to cost $3m and market rate for their farm was $1m, then we pay $3m for that, but what we recover is $1m,” the spokesperson added.

Whether the utility will be allowed to recover the additional costs remains to be seen.

“Utilities are highly regulated and we have to justify what we spend on these projects, whether it’s for structures or right-of-way costs,” the spokesperson said. “We’ll have to show the [state Public Utilities] Commission why these right-of-way costs are far more than anything that has ever come forward for a transmission project and hopefully we can recover those funds.”

NSP is currently working with approximately 100 property owners who have elected to sell their property under the “buy the farm” law in conjunction with the CapX2020 Bemidji-to-Grand Rapids, Brookings County-to-Hampton and Fargo-to-Monticello projects.

The Supreme Court decision aligns with language in House File (H.F.) 854, which the state Legislature passed during the final days of its 2013 session and Gov. Mark Dayton signed into law May 24. That bill, however, specifically excluded matters before the state Supreme Court as of  May 1.