COA: Duke Energy didn’t ‘take’ land when instructing builder to comply with utility regulations

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A Bloomington landowner that had to build a smaller warehouse than anticipated due to longstanding utility regulations failed to prove that Duke Energy engaged in a taking of its property by enforcing the regulations, the Court of Appeals of Indiana has ruled.

Judges reversed Wednesday in Duke Energy Indiana, LLC v. Bellwether Properties, LLC, individually and on behalf of all others similarly situated, 21A-CT-1848, remanding for the entry of summary judgment in favor of the energy company.

In 2002, the Indiana Utility Regulatory Commission revised Indiana’s utility regulations to incorporate by reference the 2002 edition of the National Electric Safety Code. Among other requirements, the NESC provides that if someone wants to construct a building of a certain size near an electrical transmission line of a given voltage, the builder must ensure there is 12½ feet of horizontal clearance between the line and the building.

Against that backdrop, Bellwether Properties LLC in 2004 purchased a 1.17-acre parcel of land in Bloomington. A prior owner had built a warehouse there.

The land was subject to a perpetual utility easement that a prior landowner had granted to Duke’s predecessor-in-interest. An electrical transmission line ran through the property and also provided electricity to the warehouse. The easement is 10 feet wide.

At the time of the purchase, Bellwether was aware of the utility easement but was unaware of the NESC’s requirements. Bellwether had no plans at that time to construct any other buildings on the property.

But almost a decade later, Bellwether decided to build another warehouse.

Bellwether hired an architectural firm to design the building, and the architect planned a 3,200-square-foot structure. The architect was unaware of the NESC’s horizontal clearance requirements and did not incorporate them into the plan.

In July 2013, a representative of Bellwether met with Duke to discuss the proposed warehouse. Duke indicated the warehouse could not be built as designed because the building would encroach upon the NESC horizontal clearance zone, so it would need to be redesigned or moved.

Bellwether’s architect revised the warehouse plans to avoid encroaching on the line. As a result, the warehouse’s footprint shrank by 150 square feet.

In June 2015, Bellwether filed a proposed class action complaint against Duke. It alleged Duke had engaged in inverse condemnation of its property and properties owned by other similarly situated landowners by telling Bellwether its proposed warehouse would have to be redesigned or moved to comply with NESC clearance requirements.

Duke moved to dismiss the complaint, alleging it was untimely. The Monroe Circuit Court granted the motion to dismiss and Bellwether appealed.

The Court of Appeals reversed in 2016. On transfer, the Indiana Supreme Court also reversed the trial court’s dismissal of the complaint, but on different grounds.

On remand, Duke moved for summary judgment.

The trial court held a hearing on the motion and denied it, concluding there were disputes of material fact as to whether Duke’s conduct amounted to a physical taking of Bellwether’s property. Further, the court determined Bellwether had standing to bring its inverse condemnation claim.

An interlocutory appeal ensued.

Back before the Court of Appeals in 2022, the core issue at hand was whether Duke took a portion of Bellwether’s land. Judges heavily relied on Penn Central Transportation Co. v. New York City, 438 U.S. 104, 98 S. Ct. 2646, 57 L. Ed. 2d 631 (1978), in concluding it had not.

“… (W)e cannot conclude the enforcement of the NESC horizontal clearance regulation interfered with Bellwether’s reasonable investment-backed expectations for the land,” Senior Judge Randall Shepard wrote. “There was already a warehouse on the land at the time of purchase, and Bellwether had no plans to build another one. Further, Bellwether ultimately did build a second warehouse after the meeting with Duke, and it was only slightly smaller than planned.”

Further, Shepard noted, the NESC horizontal clearance requirement had already been incorporated into the Indiana Administrative Code when Bellwether purchased the land in 2004.

“There appears to be no dispute that the NESC’s horizontal clearance standard is intended to protect life and property from the risk of harm caused by buildings being placed too close to electric transmission lines,” Shepard wrote. “In addition, the regulation applies to all properties located next to transmission lines, not merely to Bellwether’s land.”

Considering the factors set forth in the Penn Central case, the COA concluded that Duke’s enforcement of the NESC horizontal clearance regulation did not violate the takings clause of the Fifth Amendment or Article 1, Section 21 of the Indiana Constitution, and that Duke was entitled to summary judgment.

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