When developers of transmission projects become deadlocked with opposing landowners, they often resort to condemning the right-of-way through eminent domain.
Not only can that process be a bad deal for landowners, it can also be costly and time-consuming for developers.
The Center for Rural Affairs (CFRA), based in Lyons, Nebraska, recently published a report in which it outlines an alternative to eminent domain. Landowners – farmers, typically – in this scenario actually become shareholders, at least temporarily, in transmission projects.
Rather than being bystanders, they can have some influence in how transmission projects move ahead and can take home a larger share in the profits, said Johnathan Hladik, the Center’s senior policy advocate for energy and climate policy.
The CFRA is a member of RE-AMP, which also publishes Midwest Energy News.
This issue has taken on a high profile, particularly in the Midwest, where wind and the potential for wind energy abound, but systems for moving the energy to where it’s needed, do not.
‘Allow the free market to work’
Several proposals for major transmission projects are now moving through the regulatory process, and generating abundant opposition.
Two of the more contentious proposals are the Rock Island Clean Line, which would span Iowa and Illinois, and the Grain Belt Express, which would cross Kansas and Missouri, and likely Illinois and Indiana as well. Both lines are designed to move wind energy from rural areas eastward to where the electricity is needed.
At its core, the CFRA’s proposal gives landowners along a proposed transmission route a bit more control, and possibly a higher price, in the land-acquisition process.
Typically, if a landowner refuses to sell to the developer of a transmission line, the developer is granted the right to purchase the land anyway at a “fair market value.” That usually is determined by land appraisers hired by the developer.
The CFRA proposes offering landowners the option of trading their land for a certain number of shares in an entity known as a Special Purpose Development Corporation — created for the sole purpose of acquiring properties for a transmission project and then selling the bundled parcels to the developer. The number of shares granted would depend on assessed value.
The value of an SPDC “can go up or down,” Hladik said. “You allow the free market to work.”
But odds are good that the transmission district’s value would increase, said Rosalie Winn, a Georgetown University law student who helped research the report while interning with the CFRA last fall.
“Once the land is in a corridor, the land has a higher value because it’s used for a higher-value purpose,” she said. “When the SPDC is sold, they get a share of that higher transmission value.”
Shareholders in the SPDC ultimately would wield more clout in price negotiations with the transmission line developer than they would as individual landowners.
There could be benefits for the developers as well, according to Hladik.
“Eminent domain costs a lot of money, largely legal costs,” he said. “Eminent domain almost always delays projects. And delays cost a lot of money.”
And all of those costs, he said, “go to the ratepayer.”
‘A better alternative’
Hladik said the CFRA decided it needed to look for an alternative to eminent domain because “these transmission projects are getting more opposition than ever before. It’s not a great deal for the landowners. There’s got to be a better alternative out there.”
Hladik and Winn turned to the Special Purpose Development Corporation concept, developed by Israeli law professors Amnon Lehavi and Amir N. Licht. to address what they saw as the injustice and inadequate compensation paid in urban economic development projects
“We want the same thing to happen in transmission cases,” Hladik said. “Applying this to transmission is a new thing. There’s a lot of potential. In a world of merchant transmission, this is a structure that can really work.”
“Merchant transmission” refers to the development of transmission lines by third parties other than the utility serving the area.
At this point, Hladik said, “Our next step is to further discuss this idea with both developers and landowners – an effort aided by having something in hand to refer too. Where did we get it right? Where did we miss the mark? How can we make this better? Do we need to go back to the drawing board? It best serves as a conversation starter, and we look forward to more feedback.”
It could still prove to be a hard sell among landowners who are already actively opposing high-voltage transmission lines.
Diane Darr, whose Iowa farm is in the path of the planned Rock Island Clean Line, sees little to like in the CFRA’s proposal. She’s also a member of the board of Preservation of Rural Iowa Alliance, an entity formed to oppose the Rock Island project.
“I am concerned about this process moving in this direction as it appears to take the control of our private lands out of our hands,” she said. “I think it’s going to add another area of confusion to the whole process. It’s already confusing enough.”
Darr said it also doesn’t resolve other reasons landowners oppose transmission projects, such as interference with aerial spraying or the “very emotional attachment” that many people develop for land and farm operations, especially those that have been in a family for generations.
“Some people just are not going to sell. If they are going to do (the Rock Island transmission line) now, they are going to have to do a lot of condemnation.”
That kind of talk troubles Hladik.
“We’ve been using eminent domain for 200 years,” he said. “We have come up with nothing that helps us meet in the middle.
“We’re overdue for a better alternative.”