Save Our Environment

THE FLOWAGE EASEMENT WITH A JUST COMPENSATION VALUE OF ZERO

By John R. Embick, Esquire John R. Embick, PLLC Chair of the CCBA Environmental Law Section

Article 1, Section 10 of the Pennsylvania Constitution provides as follows:

No person shall, for the same offense, be twice put in jeopardy of life or limb; nor shall private property be taken or applied to public use, without authority of law and without just compensation being first made or secured.

In the case of Miller v. Borough of Indian Lake, No. 1269 C.D. 2020 (Pa. Commw. Ct. 11/16/2021), the Commonwealth Court, in an unreported decision, was called upon to review the valuation of a flowage easement. Please note that an unreported decision of the Commonwealth Court has no precedential value, see 210 Pa. Code § 69.414.

The case is interesting to environmental lawyers because the flowage easement issue in this case arose in connection with action by the Pa. Department of Environmental Resources (PaDEP) to cause Indian Lake Borough (the owner of Indian Lake Dam) to address modifications to an earthen dam, located in the Borough of Indian Lake, Somerset County. The earthen dam created a large lake which is home to over 500 property owners, and the site is just off Route 30, near the Flight 93 National Memorial.

Basically, a flowage easement gives the grantee the right to flood the grantor’s property under certain conditions. References to flowage easements are found in Pennsylvania law and in the Commonwealth’s rules and regulations in many locations, including the Fish and Boat Code, PennDOT’s rules and regulations, and the Pennsylvania Dam Safety and Encroachments Act and companion regulations, the latter administered by PaDEP, in 25 Pa. Code Chapter 105. The definition of a flowage easement is found at 25 Pa. Code 105.1, as follows:

Flowage easements—An acquired right of use of another person’s land for water temporarily or permanently impounded by a dam or backwater from the installation, operation and maintenance of a water obstruction or encroachment.

In connection with needed modifications to the Indian Lake Dam, PaDEP and Indian Lake Borough undertook to raise the elevation of the dam, so that the lake would impound more water during precipitation events, thereby reducing the chance for dam failure (a high risk for many earthen dams – if earthen dams overtop during flooding events, then the resulting erosion can cause catastrophic dam failure) and control flooding. One of the analyses PaDEP uses to evaluate necessary modifications to dams involves a determination of the Probable Maximum Precipitation (PMP) event for the specific location of the dam.

PMP is the probable maximum depth of precipitation at a specific location for a given duration that is meteorologically possible. This is a probability exercise, based on geographical location and meteorological data, and there are a number of ways PMP can be predicted. PaDEP has published its PMP estimates and methodologies and they can be found at the Department’s website, at: www.dep.pa.gov/Business/ Water/Waterways/DamSafety/Pages/ProbableMaximum-Precipitation-Study-.aspx.

The modifications to the Indian Lake Dam involved raising the elevation of the dam and expanding the existing flowage easement from 2,290 feet (above sea level, or “ASL”) to 2,295.5 feet ASL. This does not mean that the normal elevation of the lake pool would rise to 2,295.5 feet ASL; it means that during PMP events, the lake pool elevation could lawfully rise to 2,295.5 feet without a trespass occurring. The opinion does not discuss this, but I presume that the Indian Lake Dam will be designed with drainage and spillway facilities that are designed to keep the lake pool elevation somewhere at or below 2,290 feet ASL.

The plaintiffs in Indian Lake were the Millers, who owned a house on the lake, and they would not grant the Borough an expanded 5.5 foot flowage easement.

The Millers’ home sits slightly above the 2,290 foot ASL mark. The Millers would not grant a 5.5 foot flowage easement (presumably any rise in lake pool elevation of Indian Lake above 2,290 feet ASL could flood the Miller’s house). The borough then proceeded to obtain flowage easement through eminent domain power. The Millers then filed a petition to appoint a Board of Viewers to establish the “just compensation” for the expanded 5.5 foot flowage easement. The Board of Viewers awarded no compensation. The Millers appealed to the court of common pleas and a jury trial was held.

Indian Lake Borough presented a licensed real estate broker to testify as to the fair market value of the Miller property before and after the easement was acquired. The expert performed a comparative sales approach analysis (how comparative sales properties were determined was not explained in the decision). Based on the analysis, the Borough’s expert provided an estimate of just compensation in the amount of zero dollars. The main justification for this appraisal opinion apparently hinged on the probability that a PMP would be produced by a weather event producing 30 inches of rainfall in a 12-hour period, or 27 inches of rain over a 6-hour period. The estimated probability of this rainfall event was determined by a weather expert to be .0004% in a given year. I assume that this is the value which is known as a rainfall frequency return period, or the average frequency that a given precipitation event is equaled or exceeded. So, a precipitation event with a frequency return period of 1%, is a storm that has a 1% (.01 or 1 in 100) chance of occurring in any given year. Confusingly, this percentage is also sometimes expressed as a “100year storm event.” Many people therefore think that a 100-year storm event is one that will occur only once in 100 years. This is not the case, and a 100-year storm can occur a number of times in a single year, and can occur on consecutive days in the space of a year. A rainfall frequency return period of .0004% can also be expressed as a “250,000-year storm event.”

Commonwealth Court’s decision seems to infer that this means that the 250,000-year storm event is expected to occur only once in 250,000 years. This is not correct, however, and Pennsylvania has endured catastrophic rainfall events numerous times over the years (although not in the same place). The widely accepted maximum rainfall event in Pennsylvania occurred on July 7, 1942, in Smethport, McKean County, Pa. On that fateful July day, 34 inches of rain fell in 12 hours, with more than 28 inches of it deposited in just 3 hours – producing a flood of biblical proportions. We can say, however, that a “250,000-year storm” is rare, and the probability of such an event occurring at a specific location in any given year is very, very low.

With this in mind, the real estate appraiser in Indian Lake Borough examined a number of comparable properties on Indian Lake and opined that the fair market value of the property before and after the expanded flowage easement would be the same, because “a willing and informed buyer would not consider it a factor in arriving at the price.” Slip Op. at 4. Interestingly, the real estate appraiser had no sales data on the comparable properties after the increase flowage easement was obtained.

It is also interesting that no apparent analysis was undertaken as to the conditions under which the Miller’s property would be flooded under conditions less than those produced by the 250,000-year storm. The Miller’s house sits at 2,290 feet ASL, so it is reasonable to assume that higher frequency storms might also produce damage by raising the lake pool elevation above 2,290 feet ASL. Further, many climatologists believe that storm events are becoming more frequent and more robust due to anthropomorphic climate change.

So, it appears that the real estate appraiser’s opinion was primarily based on his sense that future buyers would not be frightened away by the expanded flowage easement. If I owned that cottage, I might think about getting a quote for a house lifting.