Barlow pipeline case settled in Wyo Supreme Court
After nearly two years in the Wyoming court system, Glenn Barlow and the Barlow Ranch received an opinion from the Wyoming Supreme Court on March 19.
Greencore Pipeline Company, LLC filed suit against Barlow Ranch Limited Partnership in 2011 to condemn a pipeline easement. The parties agreed on the granting of an easement for Greencore’s pipeline, but disagreed on the measure of compensation for Barlow.
The case between Barlow and Greencore began in 2011.
“On the Barlow property, there is a natural gas hub – the Dead Horse Hub,” says Glenn Barlow’s lawyer Dan Riggs, of Lonabaugh and Riggs, LLP in Sheridan. “There are many different pipeline companies who bring gas from the Powder River Basin into Glenn’s property, and it is metered, measured and cleaned up.”
The pipelines distribute gas on major pipelines down to Glenrock and Cheyenne or north to Montana and on to Chicago, he says.
“The Dead Horse Hub was developed by many different pipeline companies over 20 years,” adds Riggs. “Almost all of them have paid Barlow, and his neighbors, on the basis of an initial payment on a per-rod basis and either an annual payment or a renewal payment every few years.”
Over 20 comparable agreements have been made for easements for pipelines on the Barlow property and on neighboring properties.
In their case, Barlow and Riggs also looked at prices on neighboring properties – all of which were very similar.
“Our contention was that the pipeline company needs, since they were coming onto the Barlow property and want a pipeline, to measure the damages using the greater of the before-and-after differential or the value of rights taken, whichever is greater,” says Riggs. “We made reference to the more than 20 comparable easements on the property, and that is what the legislature said is the proper way to measure the value of the rights that Greencore took from Barlow.”
The District Court ruled, “The easements Barlow presented were not sufficiently comparable to be reliable evidence of the fair market value of Greencore’s easement.”
As a result, the District Court set the easement compensation at the average that Greencore paid to other landowners.
Additionally, the District Court ruled that annual payments were not allowed under Wyoming law.
Barlow appealed the District Court decision to the Wyoming Supreme Court.
“The Wyoming Supreme Court agreed with us,” says Riggs, noting that the District Court’s ruling against the comparable easements and annual payments were overturned.
“Wyoming law specifically provides for use of comparable sales of easements to determine the fair market value of a condemned easement,” reads the conclusion of Chief Justice Marilyn Kite’s opinion.
Kite also noted that the district court incorrectly applied legal standards in declaring that submitted transactions were not comparable, and additionally incorrectly declared that annual payment cannot constitute part of compensation.
“The entire Dead Horse Hub is a huge success,” says Riggs. “Glenn wouldn’t have more than 20 pipelines on his property if it had been a failure. The free market has once again made a success out of this, and the legislature has specifically allowed reference to comparable easements to gauge what compensation is owed.”
Riggs also adds that as long as both the landowners and pipeline companies are fair, the free markets will work as they are intended.
On the outcome of the case, Riggs says, “This case solidifies what the Wyoming legislature has said with regard to how payments for damages are made. It confirmed how you calculate them.”
The case, says Riggs, will hopefully save other landowners and pipeline companies from the expenses of litigation and will serve as a guide for landowners and pipeline companies to engage in fair negotiations.
“Any time either landowners or pipeline companies try to be unfair to the other, there are going to be problems,” comments Riggs. “This case gives good guidance to the landowners and pipeline companies as to how to approach negotiations.”
“I am really pleased with the decision. As a lawyer, I represent lots of different business owners, and if they have a good gauge like this as to how to approach their business, they can run a successful business,” Riggs comments. “This clarifies the law for both landowners and pipeline companies.”
Statutory provisions for eminent domain
“Under Wyoming law, oil and gas operators, including oil and gas pipeline operators, have rights of eminent domain,” explains Glenn Barlow’s lawyer Dan Riggs, of Lonabaugh and Riggs, LLP in Sheridan. “It is a longstanding law.”
In this case, Riggs notes that the issue in the case was with the measure of compensation required for taking lands for a pipeline easement.
He explains that, for a long time, land value for compensation was measured by taking the per-acre value of land for the entire ranch and multiplying it by the number of acres taken by the pipeline. After that, landowners received only a percentage of that value, since the land could still be used for grazing purposes.
“It doesn’t amount to very much,” says Riggs. “Then, in the early 80s, the Wyoming legislature completely redid the Eminent Domain Act.”
The amended act now reads that two methods must be used to determine the value of the easement taken, and the larger of the two figures must be used as compensation to landowners. The first method was the value of the easement rights taken from the landowner. The second method provides for compensation for a difference in value between the whole ranch before the easement was taken and the ranch after the easement was taken. The Eminent Domain Act provides that the landowner is entitled to the greater of the value of the rights taken or the before and after differential in the entire ranch.
“This legislation was enacted in the 80s so landowners could get a fair shake,” says Riggs. “If someone has come along to take his land, he should get fair value for it.”
Further, in 2007, the Wyoming legislature added a clause to allow the use of similar easements or easements on similar properties to compare values.
“The idea behind the 2007 amendment was to say, if there had been pipeline activity going on in the property or on similar property, you can use what other companies are paying as a guide,” explains Riggs. “It makes perfect sense.”