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Transcanada Hydro Northeast, Inc. v. Town of Newbury

Supreme Court of Vermont

December 8, 2017

TransCanada Hydro Northeast, Inc.
Town of Newbury, State of Vermont

         On Appeal from Superior Court, Orange Unit, Civil Division

          Michael Pratt, Acting, J., Specially Assigned

          Robert E. Woolmington of Witten, Woolmington, Campbell & Bernal, P.C., Manchester Center, for Plaintiff-Appellant.

          William H. Sorrell, Attorney General, William E. Griffin, Chief Assistant Attorney General, and Mary L. Bachman, Assistant Attorney General, Montpelier, for Defendant-Appellee State.

          Jon T. Anderson of Burak Anderson & Melloni, PLC, Burlington, for Defendant-Appellee Town of Newbury.

          PRESENT: Reiber, C.J., Dooley, Skoglund, Robinson and Eaton, JJ.

          DOOLEY, J.

         ¶ 1. Taxpayer TransCanada Hydro appeals a decision of the Orange County Superior Court valuing flow easements that taxpayer owns over land in the Town of Newbury at $1, 532, 211 for property tax purposes. Taxpayer owns and operates the Wilder Dam on the Connecticut River in Hartford, Vermont, downstream from Newbury, and the flow easements give taxpayer the right to flood land abutting the river in Newbury. As discussed in the body of the opinion, taxpayer challenges the valuation as unsupported by the admissible evidence and the court's reasoning. We affirm.

         ¶ 2. The Connecticut River, which flows from north to south, forms the boundary between the State of Vermont and the State of New Hampshire. The Wilder Dam rises above the river holding back water to a height of 385 feet above sea level.[1] Its presence affects the amount of flooding of upstream land abutting the river at least with respect to land at or below the level of the top of the dam. See Petition of Citizens Utilities Co., 117 Vt. 285, 289, 91 A.2d 687, 691 (1952) ("When a dam is erected across a river it sets the water back against the upstream river banks and over them to at least the level that the surface of the water is maintained at the dam."). At least some of the abutting land in Newbury is below the level of the dam even though the southern boundary of the Town is forty-three miles upstream of the dam and the Town extends eight miles up the river.

         ¶ 3. Erection of a dam such as to cause intentional flooding of the upstream land abutting the river is a trespass. See Restatement (Second) of Torts § 158 cmt. i, illus. 5 (1965). In essence, a flow easement is a right to commit that trespass, transforming an entry that would otherwise be a trespass for which the entrant was liable into a permitted entry for which the entrant bears no liability as long as the terms of the easement are not exceeded. See White River Chair Co. v. Conn. River Power Co., 105 Vt. 24, 52, 162 A. 859, 870-71 (1932); Mower v. Hutchinson, 9 Vt. 242, 249 (1837). It is an interest in real property. See White River Chair Co., 105 Vt. at 52, 162 A. at 870 ("As to the flowage rights, the defendant, as against the plaintiff, will be considered as the owner of the land."); 32 V.S.A. § 3605 ("The interest of an owner in . . . flowage rights . . . shall be appraised and set in the grand list as real estate to the owner of such rights.").

         ¶ 4. The flow easements being valued in this case were deeded to taxpayer's predecessor by the landowners in 1949 and 1950 when the Wilder Dam was being built. The typical flow easement deed provides:

I . . . do give, grant, bargain, sell and convey unto said New England Power Company . . . the perpetual right and easement to flow and other-wise damage so much of the hereinafter described land with the buildings and personal property thereon as may be flowed and damaged by reason of the construction, maintenance and operation (as hereinafter provided) of the dam of the Grantee across the Connecticut River between the towns of Hartford, . . . Vermont and Lebanon, . . . New Hampshire . . .; the elevation of the spillway section of such dam . . . not to exceed an assumed elevation of 385 feet . . .; said dam and its appurtenant facilities to be so constructed and operated that the elevation of the water of said River at said dam will not exceed Elevation 385 feet when the flow of said River at said dam is 140, 000 cubic feet per second or less.

         It goes on to say that the lands covered by the easement "are all [of the grantor's] lands bordering on the Connecticut River" in Newbury and describes the lands in relation to prior deeds.

         ¶ 5. Certain points about the flow easements are important to the resolution of this case. First, the height limit is applicable to the height of the dam and the water contained by the dam and not to the height of the lands subject to the flow easement. Thus, part or all of the subservient lands covered by a particular deed may lie above the level of the dam such that flooding of those lands caused by the dam alone is far less likely. In general, the easement is applicable to all land owned by the grantor and abutting the river and not just that land that was determined to be subject to flooding. Further, the evidence in this case was that the subservient land is productive farmland, and is actively used as such, although spring planting may be delayed by flooding and there is a risk of later destruction of plantings by extreme weather events that could bring flooding at any time. There was also evidence that although the height of the surface of the water behind the dam could not exceed 385 feet, it was actually maintained at a level between 380 and 385 feet and particularly at the former when the flow in the river was high.

         ¶ 6. Relying upon expert witnesses, the parties used different methodologies to value the flow easements in Newbury. The following is a simplified description of these methodologies. More detail is provided in the analysis below.

         ¶ 7. Taxpayer took the position that the value could not be based on comparable sales of flow easements because no evidence of comparable sales existed, and sale prices are influenced by the right of the dam owner to take such easements by eminent domain. Instead, taxpayer retained a hydrological firm to model the river flow with and without the Wilder Dam using software that had been approved by FERC for such modeling. The modeling was done at various flow rates of the river. At a "normal" flow rate of 10, 700 cubic feet per second, the model found that nineteen more acres along the river in Newbury were flooded with the presence of the dam than without the presence of the dam. It found that at a flow rate between 30, 000 and 35, 000 cubic feet per second the flooded acreage attributable to the dam reached thirty-three, while three more acres were flooded because of the dam at the hundred-year flood flow rate of 78, 197 cubic feet per second.

         ¶ 8. Taxpayer also retained an appraisal expert who divided the land along the river into two categories: (1) land that abutted the river up to sixty acres in the Town, called "limited utility" land; and (2) land in the Town further from the river subject to deeded flow easements. Applying the results of the hydrologist's study, the appraisal expert valued only the land the hydrologist found was flooded solely because of the presence of the dam-all of which was limited utility land-at $500 per acre based on sales of comparable limited utility land along the river. Because the appraisal expert could not separate the value of the flow easements over that land from the value of the fee interest, he maximized the value of the flow easements by attributing all the sales value to the easements. Although he looked at comparable values of dams with and without flow easements and land with and without flow easements, the appraisal expert could not derive value from these analyses. Consistent with taxpayer's position that only flow easements over land along the river that was flooded solely ...

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