UGI Sunbury LLC v. A Permanent Easement for 0.438 Acres

MEMORANDUM OPINION

Matthew W. Brann Chief United States District Judge

More than five years ago, energy company UGI Sunbury LLC obtained the easements it needed to construct a natural gas pipeline that cut through the property owned by Donald Pontius and his wife. But because the parties were unable to reach agreement on the amount UGI owed Pontius for the easements, they decided to settle the matter in court. This litigation ensued, resulting in two separate bench trials involving four different appraisal experts and an appeal to the Court of Appeals. Now, having reviewed the evidence and considered the parties' respective positions, the Court is prepared to resolve the matter-hopefully, this time, for good.

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I. BACKGROUND

On May 6, 2016, UGI filed its initial Complaint in Condemnation, seeking to acquire by eminent domain easements for use in constructing a natural gas transmission pipeline across the Pontius property in the Borough of Shamokin Dam, Snyder County, Pennsylvania.^[1] The initial Complaint sought, among other things, a “permanent right of way and easement . . . for the purpose of constructing, operating, maintaining, altering, repairing, changing the size of, replacing and removing a pipeline and all related equipment and appurtenances thereto (including but not limited to meters, fittings, tie-overs, valves, cathodic protection equipment and launchers and receivers)” as well as a restriction on Pontius's ability to “use said permanent right of way or any part thereof for a road . . . without first having obtained [UGI's] approval in writing.”^[2]

On August 2, 2016, the Court granted UGI's Motion for Preliminary Injunction and Motion for Partial Summary Judgment (the “August 2016 Order”), ^[3]“thereby allowing [UGI] access and possession of a portion of the [Pontius] property for construction of the underground natural gas transmission pipeline and the use of temporary work space needed during construction activity.”^[4] Put another

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way, the Court granted UGI the easement rights requested in its initial Complaint-including the right to install aboveground appurtenances and prevent certain vehicle traffic above the pipeline.^[5]

After the Court's August 2016 Order, “UGI installed the pipeline on [Pontius's] property and restored the surface of the property.”^[6] Both parties then hired expert witnesses to conduct appraisals of the property.^[7] On May 17, 2018, the action proceeded to a bench trial and the parties presented testimony by their respective expert witnesses.^[8] After the trial, the Court issued its ruling and directed the Clerk to enter judgment in favor of the Defendants in the amount of $254, 228.39.^[9]

On September 24, 2018, UGI filed a Notice of Appeal to the United States Court of Appeals for the Third Circuit.^[10] The Third Circuit issued its decision on February 11, 2020, holding that the Court improperly admitted and relied on the testimony of Pontius's appraisal expert.^[11] Accordingly, the Third Circuit vacated this Court's judgment and remanded the case for a new valuation hearing.^[12]

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The Court held a status conference with the parties on April 22, 2020, and then instructed the parties to produce new valuation evidence from their respective appraisal experts by October 23, 2020.^[13] The parties did so: Pontius produced a report by William F. Rothman of RSR Appraisers & Analysts, dated September 28, 2020, ^[14] and UGI produced a report by Matthew Krauser of Newmark Knight Frank, dated October 22, 2020.^[15] In their appraisal reports, Rothman and Krauser analyzed the pre-taking market value of the Pontius property (i.e., the value of the property before UGI obtained the easements and constructed the pipeline) as well as the property's post-taking value (i.e., the value of the property as encumbered by UGI's easements).^[16] Although both experts used the same “sales comparison approach”^[17] to calculate the pre- and post-taking value of the Pontius property,

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they reached dramatically different conclusions about the value of the property and the cost of the taking. Specifically, Rothman found that the damage the taking caused to the value of the property amounted to $642, 500, ^[18] while Krauser concluded the damage was only $163, 800.^[19]

Prior to trial, on July 22, 2021, UGI filed a motion in limine to exclude Rothman's testimony pursuant to Federal Rule of Evidence 702.^[20] The following day, July 23, 2021, Pontius responded in kind, filing a motion in limine to exclude Krauser's expert testimony and report.^[21] On September 20, 2021, after a pre-trial conference with counsel for both parties, the Court issued a Scheduling Order explaining that it would conditionally admit Rothman's and Krauser's expert testimony and reports, subject to a later Rule 702 determination to be made following trial.^[22] Both parties were therefore permitted to present their appraisal experts at trial.^[23]

The trial on this matter was held on October 12, 2021.^[24] Pontius presented two witnesses: his appraisal expert, Rothman, and Arthur Bowen, a real estate

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broker familiar with the Pontius property's listing history as well as the commercial real estate market in the surrounding area.^[25] UGI likewise called two witnesses^[26] in its case in chief: its appraisal expert, Krauser, and Casey Monagan, the UGI project manager who oversaw the construction of the pipeline underneath the Pontius property.^[27]

Following the trial, on November 4, 2021, the Court denied the Plaintiff's and Defendants' competing motions in limine to exclude the expert testimony and reports put forward by the other side.^[28] As such, the testimony and exhibits of Rothman and Krauser were admitted into evidence.

On November 24, 2021, UGI submitted its post-trial brief and proposed findings of fact.^[29] Pontius did the same.^[30] As such, this case is now ripe for disposition.

II. DISCUSSION

Following the one-day bench trial, the sole remaining issue before the Court is the amount of money Pontius deserves as just compensation and damages for the easements UGI obtained to construct its pipeline under the Pontius property. As the

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Third Circuit held in Tennessee Gas Pipeline Co., LLC v. Permanent Easement for 7.053 Acres, ^[31] federal courts must follow the provisions of Chapter 7 of the Pennsylvania Eminent Domain Code^[32] in determining just compensation in an eminent domain action under the Natural Gas Act. Accordingly, to calculate just compensation, the Court must proceed in four steps: (1) determine the property's pre-taking value; (2) assess the effect of the easements on the property and decide the property's post-taking value; (3) determine the value of the temporary construction easement; and (4) reconcile the three preceding valuations to reach a conclusion on the amount UGI owes Pontius.^[33] Under Pennsylvania law, this amount may be supplemented with an award for “professional fees”^[34] and “delay compensation.”^[35]

A. Pre-Taking Value

To determine the Pontius property's pre-taking value-that is, the market value of the property as of August 2, 2016, before UGI obtained the easements needed to construct the pipeline-the Court must assess the valuations offered by the parties' experts, William F. Rothman (Pontius) and Matthew S. Krauser (UGI). Although Rothman and Krauser employed the same valuation methodology (the

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sales comparison approach), they reached substantially different conclusions about the property's pre-taking value: Rothman valued the property at $950, 000, ^[36] and Krauser valued it at $750, 000.^[37] After hearing the experts' testimony and reviewing their reports, the Court concludes that Krauser's valuation more accurately reflects the pre-taking value of the Pontius property.

For their analyses of the property's pre-taking value, both Rothman and Krauser concluded that the highest and best use would be achieved by demolishing the current buildings on the property and then developing the land for commercial use.^[38] Rothman and Krauser diverge, however, in the comparable properties they select. Rothman selected three properties for comparison and, based on the sales data, calculated the adjusted price per acre for the Pontius property as $600, 000; the pre-taking value of the property, which is 1.6 acres, was therefore $950, 000.^[39]Krauser critiqued Rothman's selections, arguing that Rothman's “comparable land site three appears to be most relevant to the market value after the acquisition” and that his selected price unit (“price per acre”) differed from the “typical analysis.”^[40]

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In contrast, Krauser selected four comparable properties with an adjusted sales range of “$646, 875 - $878, 750” per site, which he averaged to $750, 000.^[41] Rothman criticized Krauser's analysis, arguing that Krauser failed to accurately account for differences in the property sizes and the market conditions at the time of the sales, and also made incorrect assumptions based on site location and improvements.^[42] As expected, both experts defended their property selections, adjustment calculations, and units of comparison when testifying at trial.^[43]

Although these disagreements are undoubtedly relevant, the Court finds most persuasive Krauser's analysis of the list price of the Pontius property between May 2011 and August 2016.^[44] As UGI notes, the Uniform Standards of Appraisal Practice Rule 1-5 requires appraisers to analyze “the listing history where no other price information is available to them so as to avoid overvaluing the property.”^[45]Moreover, the Supreme Court of Pennsylvania has held that an offer by an owner to sell his property at a specified price is admissible evidence that reflects his or her beliefs regarding the...