Can A QRU Take From You? Restrictions on Using Eminent Domain for Renewable Energy Projects
November 1, 2010

Most landowners are familiar with electric utility companies such as Public Service Company of Colorado ("PSCo"), Black Hills Energy, and Tri-State Generation and Transmission Association, Inc. Most landowners know that these electric utility companies have the power to condemn private property to construct generation plants, transmission lines, and substations. But what about renewable energy companies that are not electric utilities? Can renewable energy companies condemn private property to construct a wind farm or a solar farm? Can renewable energy companies condemn private property for a transmission line needed to deliver the renewable power to the grid?

This year the Colorado General Assembly passed House Bill 10-1001, which amended Colorado Revised Statute § 40-2-124 and increased Colorado's renewable energy standard. The new bill requires each qualifying retail utility ("QRU"), certain providers of retail electric service in the state of Colorado, to generate 30 percent of its electricity from renewable energy resources by 2020. In response to this increased standard, it is likely that the number of wind and solar projects in Colorado will increase in the next 10 years. An increase in wind and solar projects carries with it an increased need for land on which to build such projects and their associated transmission lines.

So, the question becomes, can a QRU use the power of eminent domain to condemn private property to construct renewable energy projects and transmission lines to meet Colorado's renewable energy standards? Colorado Revised Statute § 40-2-125 places certain restrictions on the power of a QRU to condemn private property for renewable energy projects. The Colorado General Assembly repeatedly tried to enact renewable energy legislation that included these eminent domain restrictions, but the bills were continually rejected by Colorado legislators. In 2005, proponents of a renewable energy standard placed the issue squarely before the voters through a ballot initiative. The voters passed Amendment 37, although by a small margin of victory, and moved Colorado toward a clean energy future. The eminent domain restrictions in § 40-2-125 were part of the 2005 ballot initiative and appear to create some protection for landowners, but how much protection does the statute truly provide?

The statute reads, in relevant part: "A qualifying retail utility shall not have the authority to condemn or exercise the power of eminent domain over any real estate, right-of-way, easement, or other right pursuant to section 38-2-101, C.R.S., to site the generation facilities of a renewable energy system used in whole or in part to meet the electric resource standards set forth in section 40-2-124."?

First, § 40-2-125 says a QRU cannot use eminent domain power pursuant to § 38-2-101. Certain Colorado statutes grant the power of eminent domain to categories of entities that condemn land for specific purposes. For example, Title 38, Article 2 grants the power of eminent domain to any corporation formed for the purpose of constructing an electric line or electric plant. Other Colorado statutes grant the power of eminent domain to specific government entities, corporations, and persons. For example, Title 38, Article 5 grants the power of eminent domain to transmission companies and electric light power companies. If a QRU relies on Article 5 rather than Article 2, do the restrictions in § 40-2-125 even apply?

Second, § 40-2-125 says the QRU cannot use eminent domain power to site generation facilities of a renewable energy system. What if the QRU intends to condemn land to build a transmission line to tie the renewable energy system to the grid rather than constructing a generation facility? Is the transmission line sufficiently distinct from the generation facility it interconnects? The statute does not seem to restrict the use of eminent domain power for transmission line construction related to renewable energy generation.

Third, § 40-2-125 says the QRU cannot use eminent domain to site generation facilities of a renewable energy system used to meet the electric resource standards set forth in § 40-2-124. What if the QRU already has exceeded Colorado's renewable energy standards such that the new facility is not needed to satisfy that requirement but rather is just a clean energy resource chosen by the QRU? For example, PSCo has stated that it is well on its way to meeting Colorado's requirement that 30 percent of its electricity generation come from renewable energy resources and may add additional renewable resources up to the retail rate impact cap presently allowed by law. This creates the possibility that any additional renewable energy generation facilities PSCo seeks to build would not be used to meet the renewable energy standards. In such circumstance, what would be the practical effect of the statutory limitation on a QRU's eminent domain power?

Finally, the statute only applies to QRUs and does not apply to independent power producers ("IPPs"). IPPs are entities other than public utilities that own facilities to generate power to sell to public utilities or other end users but that do not provide retail electric service. Arguably, IPPs have the power of eminent domain pursuant to Article 2 because they are corporations formed for the purpose of constructing an electric line or electric plant. Section 40-2-125, however, does not seem to restrict an IPP's authority to condemn for any purpose, even for the purpose of constructing renewable energy generation facilities. This is significant because QRUs frequently acquire renewable energy resources through power purchase agreements with IPPs that construct, own, and operate their own renewable energy facilities. Presumably, a QRU could use the renewable energy it purchases from the IPP to meet Colorado's renewable energy standards set forth in § 40-2-124. Thus, in what could be considered an endrun around the restrictions in § 40-2-125, an IPP could condemn land to construct a renewable energy generation facility that ultimately could be used to meet the QRU's electric resource standards – something the QRU could not do itself.

Given the uncertainty surrounding the power of eminent domain and the restrictions set forth in § 40-2-125, landowners must make sure they have the facts to determine whether this statute applies to the project proposed for their property. If you are a landowner faced with potential condemnation of your land for a renewable energy project, you should carefully investigate the entity that is condemning the property and the purpose for which the property is being acquired. Is the condemning authority a QRU or an IPP? What is the purpose of the project to be constructed on your land? If the project relates to renewable energy generation or transmission, has the condemning authority met Colorado's renewable energy standard? Does the condemning authority plan to construct a generation facility on your property or only install transmission lines? If the condemning authority is a QRU, and the project is a renewable energy project, you may be able to use § 40-2-125 to prevent condemnation of your property.