Where a shipyard claims a natural gas company’s pipeline, constructed on an easement over the shipyard’s property, entitles it to severance damages, the court grants the gas company’s motion to exclude expert opinions on the amount of severance damages.
Virginia Natural Gas, VNG, constructed a pipeline on a permanent 30-foot easement over property owned by Colonna’s Ship Yard. In a prior proceeding, CSI produced expert opinions that the pipeline caused CSI to incur more than $80 million in severance damages.
The court excluded “significant evidence” that formed the basis of those opinions. This included evidence that the pipeline might rupture or leak, that CSI would have to establish a buffer or “no hot work zone” near the pipeline and that OSHA regulations would require CSI to further isolate the pipeline or relocate areas where employees could conduct hot work.
The court admitted evidence that the easement interfered with CSI’s ability to build a planned pier. Eventually, CSI produced revised appraisals of severance damages unrelated to the safety issues the court previously excluded.
VNG sought to exclude the revised appraisals, arguing they were still based on the excluded safety issues and that the experts, Gruelle and Ray, each had inadequate foundations to support their opinion that the easement reduced CSI’s fair market value by $9.3 million and $8.7 million, respectively. VNG also argued that the revised appraisals “do nothing to satisfy the foundational prerequisites laid out by the Court relating to the hypothetical pier.”
Both Gruelle and Ray state they have spoken with shipyard personnel, who say that “the presence of a high-pressure natural gas pipeline easement on a shipyard property significantly reduces its desirability and utility, which results in a loss of market value. … Both appraisers cite this information in their explanation of severance damages, but they do not explain how they arrived at a value to attach to the stigma damages.
“Virginia has not recognized stigma damages as a basis for severance damages in an eminent domain proceedings. … Courts that recognize stigma damages almost universally apply some sort of foundational prerequisite before permitting expert testimony regarding stigma damages.”
Gruelle and Ray both stated they spoke with shipyard personnel, who said they would pay “considerably less, if anything at all,” for a shipyard with a high pressure gas line running through it. “This suggests that some shipyard operators valued the property at $0, while others gave it an unspecified, yet diminished valuation. …
“The Court and the litigant do not know why Gruelle and Ray estimated damages of approximately $9,000,000 instead of $10,000,000 or $20,000,000 or $20,000.” CSI’s counsel admitted he did not “know how or why his experts arrived at their severance damage figure[.]”
VNG’s motion to exclude the revised appraisals is sustained.
Virginia Natural Gas, Inc v. Colonna’s Ship Yard, Inc. Case No. CL18-2169. March 12, 2020; Norfolk Cir. Ct. (Hall). Robert W. Angle for VNG, Joseph T. Waldo for CSI. VLW 020-8-030, 15 pp.