JUICE: Electric Storm on the Horizon

California voters will have to decide this November whether the California Public Utilities Commission, the California Energy Commission, and other state agencies should have to pay property owners when their actions affect land values. Under Proposition 90, if state approvals of new transmission lines, power plants, and liquefied natural gas terminals diminish the value of neighboring properties, the state could be on the hook to compensate owners for their loss of land value. The initiative would also restrict the ability of agencies to condemn pieces of property. Proposition 90 - similar to a measure approved in Oregon two years ago - is one of several ballot measures across the U.S. touted as a means to clamp down on government's powers to seize private property for private use. That is not a bad thing in and of itself, but the proposition's sweeping and ill-defined reach could be disastrous. "It is a deadly combination," warned Fred Harris, a California Public Utilities Commission attorney. The initiative could seriously impede transmission projects that would connect new wind and other renewables projects, as well as traditional fossil-fuel-fired power plants, to California's grid, not to mention draining the public purse. Though none has yet been paid, Oregon's Measure 37 has resulted in more than 3,000 claims estimated at over $5.4 billion. There have been dozens of lawsuits against state and local agencies. And that may be just the tip of the iceberg. "It is the calm before the storm," said Eric Stachon, spokesperson for 1000 Friends of Oregon, a land-use advocacy organization. In California, the unnerving thing is that Oregon's measure is far narrower in scope than Prop. 90. The California initiative would place constraints on governmental regulatory authority and, unlike in Oregon, also restrict eminent-domain powers. It also is one of the few measures pending across the nation that would amend the state constitution. All the measures, including those in Arizona, Idaho, Montana, Nevada, and Washington, take their cues from the Oregon initiative. Many also respond to the U.S. Supreme Court case Kelo v. the City of New London, which upheld the ordinance allowing taking private land for a private purpose. That includes municipalities' ability to seize land to put up commercial developments, such as shopping malls. According to Stachon, claims brought under Measure 37 are a far cry from those used to sell it in the first place. "The poster child was a 90-year-old widow who just wanted to build a house for her kids but the government wouldn't let her. The cookie-cutter template and reality are a whole lot different when looking at the claims filed." Under Prop. 90, the parameter of acceptable "takings" under its narrowed "public use" is not clear, but takings for private use would be prohibited. That would presumably apply to utility infrastructure projects. Also, disputes on the applicability of Prop. 90 - be it over a public-use or a financial-loss determination - would be settled by a jury. Today, landowners can sue the government for appropriating their property for either public or private purposes and recover its fair market value. Legal battles arise in the minority of cases but are now decided by a judge. While Prop. 90 exempts government from compensating losses from takings aimed at protecting "public health and safety," what rules fall into that category depends on how that is interpreted and implemented. Would supplying energy to pump water for agriculture be a public health issue? Would it include building new plants to support increased air conditioning use to stave off blistering temperatures in desert regions, the shortage of which could lead to heat strokes and possible death? The measure surely would increase the price the state pays for seizing property to build utility infrastructure. It also would raise regulatory costs to state agencies by increasing opportunities to sue. Take the example of a power line that will interfere with a homeowner's view. The CPUC must approve a transmission project's application. The commission - as well as the public or private utility that builds the line - could presumably be brought to court for claimed land value losses. Also, the proposition could be used as a hammer to get greater compensation out of the government. "There are so many questions and uncertainties, including how a court would interpret its provisions," warned Kent Kauss, Pacific Gas & Electric state government relations manager. Calls to the Yes on Prop. 90 campaign were not returned. In addition, liability for the CPUC and other state agencies is greater than that facing Oregon entities because Prop. 90 does not allow agencies to waive regulations in lieu of payment for claimed decreases in property value. An early-August Field Poll showed that 46 percent of those surveyed would likely approve Prop. 90, while 31 percent were opposed. The measure received nearly equal support from Democrats and Republicans. In November 2004, 61 percent of Oregon's voters approved Measure 37, which requires government agencies to compensate property owners for regulations that affect their land value or to waive the offending rule. As of September 8, Oregon state agencies alone faced 2,359 claims under the measure, estimated at $5.4 billion, according to the Oregon Department of Administrative Services. Of those claims, 1,264 were filed after the state supreme court overturned a lower court's invalidation of Measure 37 in October 2005. When adding in claims against local agencies, the total number of claims is 3,038, according to Portland State University. Claimants do not have to sue to seek compensation for their losses. However, as of the end of August 2006, nearly 70 have filed suits against the state, most against the state Department of Land Conservation and Development. The Department of Justice did not tabulate the number of suits against local agencies. The Oregon measure is in "legal limbo," according to Stachon, because of a dispute over whether granted regulation waivers can be transferred, which has affected lending to developers granted agency waivers. "If all of the claims went forward, it would be incredibly damaging," he said. So, too, would the brewing electric storm created by the passage of Prop. 90. It would likely force the CPUC, the Energy Commission, the Air Board, the Coastal Commission, and other agencies to stretch their already thin resources to handle claims and compensation. Taxpayer and ratepayer money could be reallocated to private landowners in more ways than I can imagine.

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JUICE: Electric Storm on the Horizon

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