Supreme Court hears arguments in Duke Energy condemnation case
A Bloomington manufacturer argued before the Indiana Supreme Court Wednesday that it was unfairly forced to modify building plans for a new warehouse, claiming Duke Energy Indiana took part of its land without compensation.
Counsel for the utility pushed back, however, maintaining before the justices that Duke has easement rights to ensure the safe transmission of electricity.
The underlying case — Duke Energy Indiana, LLC v. Bellwether Props. LLC — stems from a disagreement between the parties over whether Bellwether’s claim was an issue of a physical taking or a regulatory taking. In a physical taking, the government acquires private property for a public purpose, as opposed to a regulatory taking, in which the government’s regulation of the property is so intrusive that it effectively takes over the property.
The dispute began nearly a decade ago when Bellwether’s plans to build the warehouse were stymied by Duke Energy’s overhead power lines in a 10-foot-wide easement over the property. Although the proposed structure only abutted the easement, the National Electrical Safety Code (NESC) requires a 25-foot-wide “strike zone” between the lines and nearby buildings. That strike zone required Bellwether to reduce the size of the warehouse.
“They’re informing us what we can and cannot do on our property,” said William Riley, Bellwether’s attorney. “It’s fundamental. It’s our land. We don’t have to change anything.”
Background on Bellwether’s warehouse
Bellwether purchased a 1.17-acre parcel of land in Bloomington in 2004, where a prior owner had already built a warehouse.
Almost 10 years later, Bellwether wanted to build another warehouse.
The company hired an architectural firm to design the 3,200-square-foot structure. But the architect was unaware of the NESC’s horizontal clearance requirements and did not incorporate them into the plan, according to court documents.
When Bellwether met with Duke to discuss the proposed warehouse in July 2013, representatives from the utility said the warehouse could not be built as designed because the building would encroach upon the electrical safety code’s horizontal clearance zone.
The NESC requires that when constructing a new building of a certain size near an electrical transmission line of a given voltage, the builder must ensure there is a 12.5-foot horizontal clearance between the line and the structure. That meant Bellwether could not build within 12.5 feet of the power line, some of which was outside of the 10-foot Duke easement.
Instead, Bellwether would have to redesign the building or move it farther away from the zone.
Bellwether ultimately sued Duke for inverse condemnation, claiming the strike zone constitutes a taking that is larger than the easement and that part of its land was taken without “just compensation.”
The Monroe Circuit Court denied Duke’s motion for summary judgment, finding a dispute of material fact as to whether Duke’s directive amounted to a physical taking.
On interlocutory appeal, the Court of Appeals reversed, finding any taking was regulatory and not compensable under the legal standards for regulatory takings.
The court determined the economic impact to the Bellwether property was minimal, noting that the new warehouse had to be resized by only 150 square feet, which reduced the number of storage racks in the building from 30 to 29.
The court also found that the electrical code clearance standard had already been in the Indiana Administrative Code when Bellwether purchased the property — property owners are charged with knowledge of the laws that affect their property, the court said.
The appeals court decision additionally emphasized that the clearance was intended to protect lives and property from being too close to electric transmission lines, which applies to all properties, not just Bellwether’s.
Bellwether then petitioned the Indiana Supreme Court to accept jurisdiction over the case. It’s now up to the justices to decide whether they’ll do so before making any other decisions. There’s no timeline for that decision to be made, however.
Skepticism from justices?
During Wednesday’s hearing, the high court justices lobbed Bellwether’s counsel with critical questions about the manufacturer’s complaint.
Justice Geoffrey Slaughter pressed Riley, Bellwether’s attorney, about whether the case presents a physical invasion on the property.
“If their lines are within their easement, how is that invading your property,” Slaughter asked. “Duke simply followed the regulation from the IURC that it’s subject to — why isn’t the IURC the one who did the taking?”
Riley held that neither the IURC nor Indiana’s electrical code “have any authority over Bellwether’s land.”
“There is nothing in any of these laws that dictates that Bellwether is obligated to listen to Duke,” Riley said. “We are not a regulated entity. There is no police power that applies to Bellwether. There’s no law that allows them to do this.”
Chief Justice Loretta Rush added that she’s “really struggling with shoehorning this case” into a matter of regulatory taking: “It’s a restriction on your client’s use of the way he wants to put his property to use, but they’re not doing any physical invasion themselves.”
Maggie Smith, an attorney for Duke Energy, argued that while the warehouse situation did qualify as a regulatory taking, Bellwether is wrongly “trying to shoehorn it into a physical taking.”
“Bellwether had an obligation to maintain the easement in a way that Duke could provide energy safely,” she said.
Smith maintained, too, that Duke “was never given the opportunity” to come up with a compromise. For example, Bellwether could have requested a variance, which Duke would have sought to get from the IURC on the manufacturer’s behalf, Smith said.
But that wasn’t part of the discussion when Bellwether’s builder met with Duke 10 years ago.
“Bellwether never came back and said, ‘Can you work with us?’ Bellwether could have just changed the slope. It didn’t have to cut its property. It could have moved it a little bit. There were many things that could happen here. Duke works with its customers. We work with the customers. We try to do everything we can,” Smith said. “Bellwether just ran off, did what it wanted, took an action that it didn’t have to take, and then turned around and said, ‘Duke, you’re responsible.’ But … that’s just not accurate.”
Smith warned that if justices were to remove the requirement of “an actual physical presence or physical encroachment” to occur, that would open up the definition of physical takings “to virtually every single law that is passed.”
“If there is a constitutional taking here, it is the result of the IURC, and that’s who should have been sued. We do not enact this regulation. We do not enforce it. We didn’t have anything to do with it. We are bound by it,” Smith said, adding that if a change in Indiana constitutional law is necessary, then it should be done in a case “where the largest stakeholders” — like state agencies or local municipal bodies — are parties and are given the opportunity to intervene.
“When you do not step foot on the property, you do not come into contact with it at all,” Smith continued. “They’re trying to put a square peg into a round hole. There’s not a single case that is anywhere close to this, because it just isn’t a physical taking.”
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