ARLINGTON, Va.—The U.S. Supreme Court will consider on Friday whether to hear the case of a group of North Dakota ranchers. The ranchers, who own property in McKenzie County, fought for years to obtain a fair price for land a pipeline company wanted to take through eminent domain. They won—but then a federal appeals court told them that they would have to pay the cost of that three-year fight themselves, forking over a significant chunk of the sales price of their land.
The ranchers have joined with the Institute for Justice (IJ), which protects property rights nationwide, to file the appeal. Twelve states, including North Dakota and South Dakota, have asked the Supreme Court to hear the case.
“North Dakota law says property owners shouldn’t be forced to pay the cost of their own condemnation, but the appellate court here swept those protections aside,” said IJ Litigation Fellow Matt Liles. “But, as demonstrated by the dozen states who weighed in on the side of the property owners here, state protections for property owners matter, and private companies should not be allowed to simply disregard them.”
When a natural gas pipeline company with federal eminent domain power demanded property from ranchers near Watford City, North Dakota, the offered price was shockingly low—just over half the market price. The property owners didn’t object to the pipeline in principle, but they knew exactly what a fair price was for a pipeline easement since few pipeline companies have the power of eminent domain. The pipeline company said that didn’t matter—that it didn’t have to pay market rates because the government had given it the power to take the land—and so the ranchers went to federal court to determine the value.
Three years later, a federal judge unsurprisingly determined that the ranchers could use market prices to show the value of their land. The judge also ruled that the company had to pay the costs of the proceeding: North Dakota law says property owners should walk away from a condemnation with the value of their land—not the value of their land minus legal fees. But then something unusual happened.
Other federal courts nationwide say that state law should apply when determining how much a private pipeline company owes for the land it takes. But the 8th U.S. Circuit Court of Appeals took a different view and said that the company only had to pay for the land, regardless of North Dakota law. To get a fair price in court, the ranchers spent hundreds of thousands of dollars.
The 8th Circuit puts property owners in a Catch-22: accept a low-ball offer for their property or fight for a fair price out of their own pocket. This lose-lose situation doesn’t square with basic ideas of fairness or with how property owners are treated in every other circuit.
“Eminent domain is among the government’s most dangerous powers, and eminent domain in private hands is doubly so,” concluded IJ Deputy Litigation Director Robert McNamara. “At minimum, private companies must color within the lines drawn by state law when they use that power to take property for themselves.”