Transcontinental v. 118 Acres of Land, Civ. A. No. 89-0251.

CourtUnited States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
Citation745 F. Supp. 366
Docket NumberCiv. A. No. 89-0251.
Decision Date19 June 1990

G. William Jarman, Baton Rouge, La., for plaintiff.

William Bernard Gaudet, Joseph E. LeBlanc, Jr., New Orleans, La., Michael Kenneth Heltz, Gramercy, La., Wilbur Woods Reynaud, Lutcher, La., Thomas H. Kingsmill, III, New Orleans, La., for defendants.

McNAMARA, District Judge.

Before the court are the following motions: (1) Motion of Plaintiff, Transcontinental Gas Pipe Line Corporation ("Transco"), for Partial Summary Judgment. Defendants, John W. Stone Oil Distributor, Inc. ("Stone"), and Wilhemina Martin Heltz, Solange Martin Faucheux, Hazel Martin Simon, Doris Mae Laiche Martin, Richard Heltz, Ferducie Faucheux, and Francis Simon (collectively the "Landowners"), oppose this Motion; and (2) Motion of Plaintiff, Transco, to Strike Affidavit Testimony. Defendant Stone opposes this Motion. The Motions, set to be heard on Wednesday, May 30, 1990, are before the court on briefs, without oral argument. The court will discuss each Motion seriatim.

1. Motion for Summary Judgment

Transco seeks partial summary judgment on its right to expropriate property for purposes of operating a natural gas storage facility.

Transco is an interstate natural gas company, as defined by section 2 of the Natural Gas Act, 15 U.S.C. § 717a(6) (1982). It is regulated by the Federal Energy Regulatory Commission ("FERC") in every aspect of its operations. Transco has operated a natural gas storage facility, known as the "Hester Storage Field," in St. James Parish, Louisiana, since 1977. The Hester field is operated pursuant to a FERC Certificate of Public Convenience and Necessity1, and an Order of the Commissioner of Conservation for the State of Louisiana2. Transco currently has conventional servitudes over the Hester field which will expire in September 1990, and Plaintiff has been unable to reach an agreement with current landowners for renewed rights.

Transco seeks to establish its right to expropriate under both federal and state law. States and the federal government have concurrent authority over interstate natural gas companies. Dupre v. Texas Eastern Corp., 639 F.Supp. 463 (M.D.La. 1986). The court has considered the elements of expropriation under both federal and state law, and holds that Transco has established its right to expropriate under federal law.

The federal Natural Gas Act provides in pertinent part:

When any holder of a certificate of public convenience and necessity cannot acquire by contract, or is unable to agree with the owner of property to the compensation to be paid for, the necessary right-of-way to construct, operate, and maintain a pipe line or pipe lines for the transportation of natural gas, and the necessary land or other property, in addition to right-of-way, for the location of compressor stations, pressure apparatus, or other stations or equipment necessary to the proper operation of such pipe line or pipe lines, it may acquire the same by the exercise of the right of eminent domain in the district court of the United States for the district in which such property may be located, or in the State courts. 15 U.S.C. § 717f(h) (1982).

Transco seeks to expropriate subsurface rights to store gas in a certain, identified geological stratum known as the Hester Storage Field. Section 717f(h) has been consistently interpreted to encompass the right to expropriate subsurface gas storage rights. Columbia Gas Transmission v. Exclusive Gas Storage Easement, 776 F.2d 125 (6th Cir.1985); Mississippi River Transmission Corp. v. Tabor, 757 F.2d 662, 666, fn. 5 (5th Cir.1985). This court finds, therefore, that the property rights which Transco seeks to expropriate fall squarely within the broad grant of authority in § 717f(h). The court also finds that all of the property being sought by Plaintiff is within the boundaries of the Hester field as described and depicted in the FERC Application.3

As required by Section 717f(h), Transco is the holder of a FERC Certificate of Public Convenience and Necessity ("FERC Certificate") authorizing it "to acquire, construct and operate the subject facilities and to render natural gas storage and transportation services ... all as more fully described in the application, as supplemented, in this proceeding." FERC Certificate. Transco thus satisfies the statute's requirement of holding a FERC Certificate.

The next criterion is that the holder of the Certificate be unable to acquire the necessary land by contract or be unable to agree with the owner as to the price to be paid. The Affidavit of Steve Gibson, Transco's Land Representative, indicates that Mr. Gibson negotiated with the various landowners, and that he was unable to acquire the necessary land by contract; nor was he able to reach an agreement as to the price with the landowners. Indeed, the mere existence of this suit is evidence that Transco was unable to acquire the necessary land by contract.

Transco also seeks expropriation under state law. Louisiana allows expropriation under La.Rev.Stat.Ann. art. 19:2(5) (West Supp.1990). With respect to subsurface property, before the broad right to expropriate granted by art. 19:2(5) can be exercised, the conditions of La.Rev.Stat.Ann. art. 30:22 (West 1990) must be met. Since the court concludes that Transco has satisfied all the elements for expropriation under federal law, the court does not address the elements of expropriation under state law.

In addition to satisfying the requirements of § 717f(h), federal law requires the condemnor to have conducted good faith negotiations with the landowners in order to acquire the property, and a public and necessary purpose. The court will consider each element in turn.

A. Good Faith Negotiation

When evaluating whether a condemnor engaged in good faith negotiations, the central question is: "Did the condemnor make a `good faith' attempt to acquire the property or rights by conventional agreement before the expropriation suit was filed?" Dixie Pipeline Co. v. Barry, 227 So.2d 1, 5 (La.Ct.App.3d Cir.1969), writ refused, 255 La. 145, 229 So.2d 731 (La. 1970). When measuring good faith, the amount offered to the landowner "is material only insofar as it may have some bearing on the question of whether the condemnor was in good faith." Id. It has been held that a single offer to purchase the right may be sufficient to constitute good faith. Texas Gas Transmission Corp. v. Pierce, 192 So.2d 561 (La.Ct. App.3d Cir.1966).

Transco's negotiator, Steve Gibson, testified in his Affidavit that he negotiated with the Defendants on numerous occasions for acquisition of both the surface and subsurface rights. All known landowners were contacted at least twice. In every case, the lowest offer made was equal to or in excess of the appraised value of the subsurface rights and surface rights, based on appraisals from Atwater Consultants, Ltd., and Max J. Derbes Appraisers and Real Estate Consultants, Inc. Negotiations eventually reached a point where Transco concluded that any further attempt would be useless.

Stone vigorously contends that Transco negotiated in bad faith. Stone does not contest that Transco made several offers for the property; instead Stone states that Plaintiff's top offer of $400 an acre was too low to constitute good faith. Defendant focuses on Plaintiff's method of valuation, and contends that value should be based upon the operation of the entire field as a going concern, and not just the value of the subsurface and surface rights.

Transco's valuation is based upon the generally accepted methodology utilized in Mid-Louisiana Gas Co. v. Sanchez, 280 So.2d 406 (La.Ct.App.4th Cir.1973), writ denied, 282 So.2d 142. The Sanchez court considered the value of materials or deposits on the condemned land, the replacement value of the native gas, and the adaptability of the property in question for the proposed use. The court did not consider the value of the field as an on-going commercial enterprise.

Cases from other jurisdictions involving expropriation of property for gas storage have uniformly disallowed any valuation of the storage rights based on the value of the entire field to the taker. See e.g., Transok Pipeline Co. v. Darks, 565 F.2d 1150 (10th Cir.1977), cert. denied, 435 U.S. 1006, 98 S.Ct. 1876, 56 L.Ed.2d 388 (1978). The jurisprudence is clear that in determining the value of land taken for a public use, its value for such use is not to be considered. United States v. Chandler-Dunbar W.P. Co., 229 U.S. 53, 33 S.Ct. 667, 57 L.Ed. 1063 (1913). A landowner is not entitled to the enhanced value of his property attributable to the project which makes the condemnation necessary. State of Louisiana, Sabine River Authority v. Lindsey, 524 F.2d 934 (5th Cir.1975), cert. denied, 426 U.S. 948, 96 S.Ct. 3166, 49 L.Ed.2d 1184 (1976).

Stone argues that this case should be an exception to this rule since Hester is an existing facility. Defendant's argument fails, however, since Hester is an existing facility only because of Transco's investment. The Hester field operates by virtue of Transco's plant, pipeline, wells, management, and labor. Stone contributed nothing to the development of the field. Defendant bought the property subject to Transco's servitude of storage.

Moreover, there is no evidence that Stone would use the land as a storage facility; the property is presently being used as a sugar cane field. Stone does not own the entire Hester field. Without rights in the entire field, Defendant cannot operate the property for gas storage. Nor has Stone acquired a FERC Certificate to operate Hester as a gas storage field.

This court concludes that there is no basis for Defendant's argument that Transco negotiated in bad faith by not valuing the field as an on-going business concern. The amount offered to Stone compares favorably with amounts...

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