Enhancing the existing power grid, both in strength and in size, is a critical component of achieving the current administration’s goal of delivering 100% clean energy by 2035.  Before construction can begin on these utility projects, the private land needed for the location of the infrastructure must be acquired for the public benefit, which requires both a credible and comprehensive appraisal to assist negotiators in their conversations with property owners.

As a result of the significant investment committed to upgrading the electric grid identified in the Infrastructure Investment and Jobs Act (IIJA), a large increase in construction is anticipated. The Department of Energy (DOE) in October 2023 announced a $1.3 billion investment to provide affordable and reliable power to households across the country as well as nearly $3.5 billion to strengthen grid reliability and resilience, which, when matched with private and local investment, will total $8 billion in new energy infrastructure. These awards align with the final National Transmission Needs Study released by the DOE that details the assessment of current and future transmission needs through 2040 to help guide investments and planning decisions. The findings are centered around three key items: 

1. Additional transmission infrastructure is required
2. Increasing interregional transmission will maximize benefits
3. Energy needs will shift over time with the clean energy transformation and bolstering the existing grid to be resilient in the face of extreme weather events 

As funding for infrastructure projects continues to be dedicated and awarded, utility companies will be focusing on gaining site control for their preferred right-of-way routes.

Appraisals for partial acquisitions

When a utility company seeks to establish or expand utility transmission corridors, they need quality valuation reports to prepare their acquisition budgets, determine the route selection, evaluate impacts and potential damage estimates, easement acquisitions, and potentially litigation support. Property owners play an important part in these projects for the public benefit and are often selling their property against their will. 

Determination of the appropriate scope of work of an appraisal for its intended use is a vital step of the appraisal process detailed in the Uniform Standards of Professional Appraisal Practice (USPAP), which represents the generally accepted and recognized standards of appraisal practice, and states that “an appraiser must not allow assignment conditions to limit the scope of work to such a degree that the assignment results are not credible in the context of the intended use.” Appraisers must remember the purpose and function that the appraisal serves, which is not only to assist the utility company in their strategic planning and business decisions, but to aid them in acquiring property often within tight timeframes. To achieve this goal, we have found that incorporating a physical site inspection with the property owner into the scope of the appraisal elevates the credibility of the appraisal and presents an opportunity for the property owner to share meaningful information about their property with the appraiser for consideration prior to a value conclusion. 

In our experience of sitting down with property owners at their kitchen table, they are generally willing to give factual information on their property; This also provides them the opportunity to share stories about the sentimental value their property holds.  Furthermore, it demonstrates the acquiring party’s respect for their position in this process.

Several years ago we appraised a home owned by a 92-year-old man who planted one evergreen tree at the birth of his four children, only to have all precede him in death, and every night he would sit at the bench facing the trees to talk to his “children”. The proposed utility corridor was going to require taking all four mature evergreen trees. As an appraiser, we must evaluate the contributory value of the trees to the whole property and the compensation due the property owner as a result of the partial acquisition. But what was the value of those trees to the 92-year-old man? And if this case went to trial, at what amount would the jury have evaluated those trees at? This particular site visit was integral in assisting the client in negotiating with the property owner since he had reassurance he was being treated fairly and received the respect of those engaged in the project.

On the other side, designated negotiators and attorneys for utility projects are seeking to be educated about the affected properties along the corridor and they want more information about the properties so they can provide the same to the property owners in their discussions. A complete and comprehensive appraisal is a resource that negotiators not only need, but want in order to explain to property owners how their offer was determined. 

While we are often retained by the law firms hired by utility companies to appraise real property, as appraisers we are charged with the ethical responsibility of maintaining the public trust by preparing a credible opinion to the highest standard. A physical site inspection can be the sole contributing factor between settling negotiations and going to trial to forcefully acquire the property through the power of eminent domain, costing both the property owner and utility company thousands of dollars and valuable time.

How CohnReznick can help

CohnReznick’s National Valuation Advisory Services team has extensive experience in working with law firms that support utility companies and engineering firms in appraising private property subject to partial acquisitions, in addition to being a trusted advisor and providing consulting services throughout the project life. Our experience includes evaluating fee simple acquisitions for substations, above and below ground permanent easements for electric power transmission and natural gas pipelines, air rights associated with overhead electric transmission wires, temporary construction easements, access easements, as well as determining the impact to the remainder property because of the partial interest acquisition. We employ a personal approach to valuation by taking time to visit and speak with property owners who are impacted by the new or expanding corridor. Our historically high settlement rates reflect the care and commitment our team applies in preparing accurate valuations that assist our clients in achieving their project goals.

In addition, CohnReznick has substantial experience in preparing property value impact studies for a wide variety of projects, including electric power transmission and natural gas pipelines. We have a library of published studies on property value impacts; have prepared our own analyses on commercial, residential, and agricultural properties across the United States; and have quantified the impact to real property, if any exists.