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Eminent Domain and Underground Natural Gas Storage


Typically, in California eminent domain cases, fair market value is determined by a variety of factors, primarily through the analysis of comparable sales or an income capitalization approach. However, relevant market data is not always available. In such cases, the law allows compensation to be determined by other methods that yield a just and equitable valuation.

When the Central Valley Gas Storage v. Southam decision was appealed, it was explained when this method of valuation can be used, in addition to any limits an appraiser might encounter. In the case, Central Valley operated a reservoir for the storage and withdrawal of natural gas. With the approval of the California Public Utilities Commission, Central Valley took eminent domain action to acquire Southam’s underground gas storage rights on 80 acres of land. A dispute arose when both parties disagreed on the method of valuation.

  • Central Valley sought to value the land using market data involving similar transactions, based on the number of surface acres the landowners held within storage boundaries.
  • Southam sought to value it based on the volume of gas in the storage reservoir.

Central Valley argued that valuing the land based on the volume of gas storage was improper given the speculative nature of it, which the trial court agreed with. Southam appealed, claiming the approach was proper and there are no true comparables when it comes to dealing with underground storage reservoirs. The decision allows for the valuation of underground rights based on surface acres with the existence of supporting market data.

San Diego Eminent Domain Lawyers

At Allen, Semelsberger & Kaelin LLP, we are here to help protect your property, your company, and your best interests in any eminent domain case. Over the years, our lawyers have been selected for numerous awards and have successfully obtained excellent results on behalf of our clients.

Contact us today at (888) 998-2031 to schedule a free case evaluation.