Square Butte Elec. Co-op. v. Hilken

• Decision Date: 23 June 1976
• Docket Number: No. 9194,9194
• Parties: SQUARE BUTTE ELECTRIC COOPERATIVE, Plaintiff and Appellant, v. E. Gene HILKEN, Defendant and Appellee, and eight companion cases. * Civ.
• Court: North Dakota Supreme Court

Page 519

244 N.W.2d 519

SQUARE BUTTE ELECTRIC COOPERATIVE, Plaintiff and Appellant, v. E. Gene HILKEN, Defendant and Appellee, and eight companion cases. ^*

Civ. No. 9194.

Supreme Court of North Dakota.

June 23, 1976.

Rehearing Denied July 21, 1976.

Syllabus by the Court

1. While the power of eminent domain inheres in the sovereignty of the state and is not dependent on any specific grant, the state constitution restricts taking private property to takings for a public use with just compensation having first been made to the condemnee. N.D.Const., Section 14.

2. Merely falling within the purposes specified in Section 32--15--02, N.D.C.C., in behalf of which the right of eminent domain may be exercised is insufficient to satisfy the constitutional requirement that the taking be for a public use. Where the existence or nonexistence of public use is placed in issue, the determination, dependent as it is upon the facts and circumstances of the matter, is properly a judicial one. N.D.Const., Section 14; Section 32--15--02, N.D.C.C.

3. For a public use to exist, there must be a substantial and direct benefit to the public in the state which grants the power of condemnation.

4. A finding of fact is clearly erroneous only when, although there is some evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been made. Rule 52(a), N.D.R.Civ.P.

5. In determining whether certain benefits comprise a public use, where none alone is sufficient, the court must consider the cumulative effect of the benefits. Where the evidence establishes that reserve and emergency power supplies will be increased, that the existing electrical distribution system will be stabilized, that options exist which are likely to be exercised and thus provide electrical power to a substantial number of state residents at lower cost than will otherwise be available, and that certain other benefits will accrue, the cumulative effect is sufficient to find a public use.

Vogel, Vogel, Brantner & Kelly, Fargo, and Johnson, Johnson & Devine, Lakota, for plaintiff and appellant; argued by John D. Kelly, Fargo.

Christensen & Baer, Bismarck, and Jos. A. Vogel, Jr., Mandan, for E. Gene Hilken, Donald T. Bender and Judy A. Bender, Robert J. Dohn and Mary Dohn, Clarence W. Small and Ellen C. Small, Edmund Spitzer and Margaret Spitzer, defendants and appellees; and Jos. A. Vogel, Jr., Mandan, for Ernest Lang, defendant and appellee; appearances by Carma A. Christensen, Bismarck and Jos. A. Vogel, Jr., Mandan; argued by Jos. A. Vogel, Jr., Mandan.

Alfred C. Schultz, Bismarck, for Lawrence Sorch and Gail Sorch, and John Sorch, defendants and appellees.

Dr. and Mrs. Douglas A. Miller, pro se.

Mr. and Mrs. Frank Murray, not represented by counsel.

ERICKSTAD, Chief Justice.

This is an appeal from a judgment entered in Burleigh County District Court on September 18, 1975, which denied to Square Butte Electric Cooperative the power of eminent domain for failure to establish a public use.

In Square Butte Electric Cooperative v. Dohn, 219 N.W.2d 877 (N.D.1974), we held that Square Butte was required in its application for a permit to enter upon private property for the purpose of making a survey relating to a possible taking, only to show that it was in the category of persons entitled to seek eminent domain. We also held that whether the specific land sought to be surveyed was 'compatible with the greatest public benefit and the least private injury,' Section 32--15--06, N.D.C.C., was an issue that would not ripen prior to the commencement of an eminent domain action.

In its findings of fact in this action, the trial court determined that 'the selection of the route is compatible with the greatest public benefit and the least private injury.' That finding is not challenged here.

After briefly reviewing some cases cited by the parties in Dohn relating to public use, we deferred ruling on the public use issue:

'Because we believe that a determination of this issue is premature at this time, a condemnation action having not been commenced, and that it is better to delay a determination of what constitutes a public use until that issue has been more extensively briefed and considered by the trial court in conjunction with the condemnation action itself, we shall not attempt to determine this issue at this time.' Id., at 882.

The matter before us relates specifically to public use. The trial court's conclusions of law read as follows:

'1. That the plaintiff, Square Butte, has wholly failed to sustain its burden of proving public use and the Complaint of the plaintiff is hereby dismissed in all things, with prejudice, and with costs to the defendants.

'2. That any association of Square Butte with power pools and energy backups is not direct enough to support requirement of public use;

'3. That Square Butte will not supply electrical power to the citizens of North Dakota;

'4. That the plaintiff has established the necessity for the taking of the easements as to the route selected and would be entitled to the right of eminent domain on this question if public use has been established.'

In order to clarify our discussion of the findings of fact and the judgment, let us review the background and the parties to this action.

Square Butte was incorporated in North Dakota on May 24, 1972, to generate and transmit electric power to rural electric cooperatives. It was capitalized at $1,000 through issuance of 100 shares at $10 per share. Square Butte employs only one person, its general manager Lyle Lund, who has been employed by Minnkota Power Cooperative for nearly 25 years.

Minnkota is a wholesale distributor of electricity organized in Minnesota with its principal place of business being Grand Forks, North Dakota. There are 12 Class A members of Minnkota who own and govern the distributor. Those 12 include four rural electric cooperatives in eastern North Dakota and eight rural electric cooperatives in northwestern Minnesota. Each of the 12 rural electric cooperatives has one representative on Minnkota's board of directors and a designated number of delegates to attend Minnkota's annual meeting.

There are 58,000 billed customers on Minnkota's lines with the number evenly divided between North Dakota and Minnesota. In addition to the Class A members of Minnkota, there are a number of investor-owned utilities and other generation and transmission cooperatives which purchase surplus power from Minnkota on a short-term basis and which are designated as Class C members of Minnkota. Some of the Class C members supply electricity to North Dakota. Nonetheless, the corporate purpose is mainly to serve the 12 rural electric cooperatives who are Class A members.

In the early 1970's, according to witnesses called on behalf of Square Butte, the combination of increasing projected load growths on the Minnkota system and the curtailment of traditional Rural Electrification Administration loans led Minnkota to seek alternate sources of financing for new generating plants. An investor-owned utility serving part of northern Minnesota, including Duluth, was also looking for additional sources of power. Minnesota Power and Light, through negotiations with Minnkota, ultimately agreed to guarantee bonds and securities for construction of generation and transmission facilities in exchange for delivery of electrical power to its system. Because an after-acquired property clause in Minnkota's mortgage with REA would have rendered the project's financiers' interests junior to REA's interest in Minnkota property, the creditors required that a new entity--Square Butte--be formed to operate the Square Butte project facilities. Because of the amount of power to be sold to MP from the project, ownership of the project by Minnkota would also have resulted in loss of Minnkota's exempt status under 26 U.S.C. § 501 for certain internal revenue purposes.

For those reasons, Square Butte was incorporated with control resting in the 12 rural electric cooperatives who are Class A members of Minnkota. It subsequently entered into a power sales and interconnection agreement with MP .

The Square Butte project includes a 400 megawatt lignite fired generating plant (Center #2) near Center, North Dakota, and a direct current (DC) transmission line from the plant to Duluth, Minnesota. Center #2 will be adjacent to the Milton R. Young plant (Center #1) and will require an additional 30 employees. The DC line will cross 225.8 miles of North Dakota, including 155.1 miles of nonirrigated cropland, 63.1 miles of pasture, 2.1 miles of woodland, and 5.5 miles of wetland. Square Butte is apparently seeking easements that are 120 feet wide.

Because the line is DC, Square Butte must install a converter at Center #2 and MP must build another converter at Duluth. It is only before the power is converted from AC to DC at Center and after it is converted from DC to AC at Duluth that the power is usable by existing consumers. The system does not include any other converters and, because of the expense, none are presently planned.

Both Minnkota and MP are members of the Mid-Continent Area Power Pool (MAPP) which requires its members to maintain a 15% Reserve capacity related to annual system demand. Square Butte is not a member of MAPP. The MAPP system is designed to maintain a degree of reliability such that in only one instance in 10 years will the pool not be able to serve all of the load requirements. Basically, it provides a system capacity to cover generation plant outages, whether scheduled or not.

The defendants herein are landowners in Burleigh County, across whose property Square Butte seeks easements for its DC power line and structures.

Given this factual background and the district court's ruling, we must discuss three matters: (1) whether the public use issue is proper for judicial determination; (2) what the requisites of...