It is a little-known fact that, in New York, electric and gas corporations may acquire property via eminent domain if said property is necessary for its corporate purposes. Eminent domain is an awesome power that is usually reserved for the government. However, New York state has long granted this same eminent domain power to utilities as well.

Before we delve into the subject at hand, it is important to first understand the broad power of eminent domain, especially in New York. Under the takings clause in the Fifth Amendment to the United States Constitution (the Fifth Amendment) and Article I, Section 7, of the New York State Constitution “… [P]rivate property shall not be taken for public use, without just compensation.” See U.S. Constitution amend. V; N.Y. Const. art. I, §7.

The definition of public use is extremely broad, especially after the renowned U.S. Supreme Court (SCOTUS) decision in Kelo v. City of New London, 545 U.S. 469 (2005). In Kelo, a property owner named Susette Kelo, together with other private property owners, sued the city of New London, Connecticut, for an abuse of its eminent domain power because the city government had seized private property for economic redevelopment, i.e., for the alleviation of urban blight. The Kelo plaintiffs based their claim on the notion that economic development was not a “public use” as such term is defined in the Fifth Amendment.

The court disagreed.

SCOTUS held that “[e]conomic benefits are a permissible form of public use that justifies the government in seizing property from private citizens.” Specifically, SCOTUS held that: “[t]he city’s proposed disposition of petitioners’ property qualifies as a ‘public use’ within the meaning of the Takings Clause.” See Kelo at pp. 6–20.

SCOTUS further held that:

Though the city could not take petitioners’ land simply to confer a private benefit on a particular private party, see, e.g., Midkiff, 467 U. S., at 245, the takings at issue here would be executed pursuant to a carefully considered development plan, which was not adopted “to benefit a particular class of identifiable individuals,” ibid. Moreover, while the city is not planning to open the condemned land—at least not in its entirety—to use by the general public, this “Court long ago rejected any literal requirement that condemned property be put into use for the … public.” Rather, it has embraced the broader and more natural interpretation of public use as “public purpose.” See, e.g., Fallbrook Irrigation District v. Bradley, 164 U.S. 112, 158–164. Without exception, the Court has defined that concept broadly, reflecting its longstanding policy of deference to legislative judgments as to what public needs justify the use of the takings power. Berman, 348 U. S. 26; Midkiff, 467 U. S. 229; Ruckelshaus v. Monsanto Co., 467 U. S. 986. Pp. 6–13 (emphasis added).

See Kelo, 545 U.S. 469.

What does Kelo have to do with utilities and their right to acquire property in New York by eminent domain? In short, everything.

Since Kelo, the concept of public use has been broadly interpreted, especially in New York. Namely, the SCOTUS majority held that the definition of public use is essentially anything that serves a public purpose, and further held that the court’s long-standing policy is to defer to local “legislative judgments as to what public needs justify the use of the takings power.”

Thus, it follows that under Kelo, the statutory authority set forth in Section 11(3-a) of the New York Transportation Corporations Law (TCL)—which grants eminent domain powers to utilities that need to acquire property for their corporate purposes®qualifies as a judgment by the New York Legislature that justifies the grant of the eminent domain takings power as a public need. See Kelo; TCL §11 (3-a).

Further, the aforementioned Kelo holding essentially makes the TCL, and the takings power that it gives to New York utilities, constitutional on its face.

TCL §11(3-a) states that an “electric corporation and a gas corporation shall have power and authority to acquire such real estate as may be necessary for its corporate purposes and the right of way through any property in the manner prescribed by the eminent domain procedure law.” Under TCL §11(3-b), the “construction, use and maintenance by an electric corporation of transmission, distribution and service lines and wires in, over or under any street, highway or public place and the construction, use and maintenance by a gas corporation of transmission … as may be necessary for its corporate purposes, are hereby declared to be public uses and purposes” (emphasis added).

Under the TCL and the New York Eminent Domain Procedure Law (EDPL), utilities have the right to acquire property by eminent domain as a condemner in the same way as the city of New York or the local New York government, after first complying with the notice and initial offer of compensation requirements. See TCL §11(3-a); see also EDPL §§201, 301 et. seq., 402(B), and 501(B).

However, utilities may only acquire private property via eminent domain, but may not acquire any property that is owned by the “state, a political subdivision thereof, or a municipality” (i.e., the government). See TCL 11(3-b).

It should be noted that, pursuant to the EDPL, private property owners and commercial tenants (collectively, “condemnees”) have the same rights in utility acquisitions as they do in government acquisitions. In other words, condemnees may file claims for additional compensation against a utility condemnor (seeking an amount of compensation over and above the initial compensation offered to them) in the same way as they would file such a claim against a government condemner. See EDPL §§503(B) and (C).

With the advent of modern energy efficiency, and with governments, private companies and consumers moving away from oil and gas toward cleaner energy (such as electricity and solar), New York’s aging infrastructure will need to be replaced in order to meet increased demand. It is likely that more New York state and city utilities will take advantage of the eminent domain powers granted to them by the TCL and the EDPL in order to achieve their greener energy goals.

Reprinted with permission from New York Law Journal, © ALM Media Properties LLC. All rights reserved.