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Nature of Suit Code: 210
Nature of Suit: Land Condemnation
Cause of Action: 

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,. 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

FILED 

United St.at.es Court of Appeals TPnth Circuit 

FEB 111988 

UNITED STATES OF AMERICA, ) 

) 

ROBERT L. HOECKER 

Clerk 

Plaintiff-Aooellant ) 

) 

v. ) Nos. 85-2740 

) 85-2745 

9.13 ACRES OF LAND, MORE OR LESS, ) 85-2746 

SITUATED IN WASHINGTON COUNTY, OKLAHOMA,) 85-2747 

and WILMA F. CANARY, et al., and ) (N.D. Okla.) 

UNKNOWN OWNERS, et al., )(D.C. Nos. 79-C-683-C 

) 79-C-684-C 

Defendants-Aooellees ) 79-C-685-C 

79-C-686-C) 

ORDER AND JUDGMENT 

Before McKAY, ANDERSON, TACBA, Circuit Judges. 

These cases involve the compensation that the United States 

must pay to the owners of eighteen tracts of land in Washington 

County, Oklahoma, for the subordination of all mineral rights to 

land to be flooded as a result of an Army Corps of Engineers 

project. Each of the tracts contains oil, gas, or other mineral 

interests, and each of these tracts was subordinated as part of a 

comprehensive waterways improvement plan in the Arkansas River 

basin. The government brought four separate actions in federal 

district court to condemn the land and to determine the 

compensation that the government must pay to the owners. The 

government appeals from a judgment against it for $538,645.00. We 

affirm. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

Appellate Case: 85-2746 Document: 010110027444 Date Filed: 02/11/1988 Page: 1 
assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.8. The cause is therefore ordered 

submitted without oral argument. 

The district court appointed a commission pursuant to Fed. R. 

Civ. P. 71A(h) to determine just compensation for the takings. 

The commission submitted a report to the district court on 

September 9, 1983, but the court resubmitted the cases to the 

commission because the report failed to satisfy the requirement of 

United States Y.!. Merz, 376 U.S. 192, 199 (1964), that "[t]he path 

followed by the commissioners in reaching the amount of the award 

••• be distinctly marked." The commission submitted a 

supplemental report to the district court on December 6, 1984. 

The court approved the report over the objections of the 

government. 

On appeal, the government alleges that there is no evidence 

to support three of the component values used by the commission to 

calculate the amount of compensation. These three values are: 1) 

the $50,000 per barrel of oil per day value of production, 2) the 

$410 per acre residual mineral value, and 3) the salvage value of 

the oil field equipment. 

I . 

A commission's determination of just compensation can be set 

aside only if the findings are clearly erroneous,~, United 

States Y.!. 1,606.00 Acres of Land, 698 F.2d 402, 405 (10th Cir. 

1983); United States Y.!. 77,819.00 Acres of Land, 647 F.2d 104, 109 

(10th Cir. 1981), or the award is "based upon a misapplication of 

law, unsupported by the evidence or contrary to the clear weight 

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of the evidence." 77,819.00 Acres of Land, 647 F.2d at 109. We 

are especially unwilling to disturb a commission's finding of just 

compensation in an oil and gas case, for we recognize that "there 

can be no absolutes in the speculative area of oil reserves." 

United States v. 79.95 Acres of Land, 459 F.2d 185, 188 (10th Cir. 

1972); see also United States v. 179.26 Acres of Land, 644 F.2d 

367, 372 (10th Cir. 1981). Even in oil and gas cases, though, 

evidence of just compensation "must be founded upon substantial 

data, not mere conjecture, speculation or unwarranted assumption. 

It must have a rational foundation." 179.26 Acres of Land, 644 

F.2d at 372 (quoting United States v. Sowards, 370 F.2d 87, 92 

(10th Cir. 1966)). 

In this case, the parties presented sharply conflicting 

testimony to the commission. The landowners' expert witness, 

Forrest A. Garb, used the discounted cash flow method to compute 

the value of the property taken. Garb based his calculations on, 

among other things, the value of anticipated production and the 

value of hypothetical production from non-producing areas. The 

government's expert witness, Darrell w. Rosiere, used the 

comparable worth method to determine the value of the property 

taken. Rosiere relied upon comparable lease assignments and sales 

of mineral rights. 

The commission described the process that it used to resolve 

the parties contradictory testimony as follows: 

The Commission adopts the "market data approach" 

(sales of comparable properties) and the evidence as to 

such approach introduced by Plaintiff in reaching the 

before taking value and the after taking value of the 

tracts taken thereby determining "Fair Market Value" on 

the date of the taking. The Commission gave 

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consideration to the evidence presented by witness 

Forrest A. Garb, witness for Defendant, but the 

Commission could not accept the testimony of said 

witness or his approach in determining the values of the 

tracts in question, said approach being "discount cash 

flow analysis" or "income approach"~ to accept the 

approach of the witness Mr. Garb the Commission would be 

accepting assumptions, speculation and guess work 

relie[d] upon by witness Garb. The Commission did take 

into consideration the testimony of Defendant's witness 

as to values. 

The Commission, in determining the before taking 

value and the after taking value of the tracts taken, as 

stated above, used the Market Data Approach on 

comparable sales. The Commission did take into 

consideration parts of the testimony of the witness 

Garb. The Commission took into consideration the 

testimony of Plaintiff's witnesses in adopting the 

Plaintiff's approach as to the Fair Market Value of the 

tracts taken on the date of taking. 

Supp. Report of Comm'rs at 2-4. 

In a similar case involving sharply conflicting testimony, 

this court held recently that "commission findings derived from 

conflicting evidence are binding on a court unless a clear mistake 

has been made." United States Y.:.. 2,560.00 Acres of Land, Nos. 85-

2023, 85-2024, 85-2025, slip op. at 11 (10th Cir. Jan. 4, 1988). 

Where the commission clearly identifies the basis of its valuation 

and relies on evidence in the record -- even though conflicting --

we cannot say that a clear mistake was made. 

II. 

The government asserts that three of the values the 

commission used to calculate just compensation are unsupported by 

the evidence. 

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A. 

The commission used a value of $50,000 per barrel of oil per 

day in determining the loss of current production. The commission 

explained its selection as follows: 

The Commission, in their approach to determine the Fair 

Market Value of the tracts taken, considered the 

following and used the same: ...• Allowed the sum of 

$50,000 for per barrel per day production. The 

Commission believed from the evidence, the wells on the 

tracts taken would be able to produce to Lessee; the 

Lessor would be allowed a value equal to his percent of 

lease. 

Id. at 4. 

The government objects that the $50,000 value is unsupported 

by the evidence. The testimony offered by the government and the 

landowners supported values of existing production in 1979 ranging 

from $10,000 to $50,000 per barrel of oil per day. The $50,000 

estimate was made by Charles Martin, one of six people 

knowledgeable about oil production in the area who was interviewed 

by the government. The government now asserts that the $50,000 

figure is not representative of the leases at issue in this case. 

We have reviewed the basis for the $50,000 value and the other 

estimates offered by the other witnesses who addressed this issue. 

The commission clearly marked its path when it adopted the market 

data approach to valuation. The commission then adopted a 

valuation that was supported by testimony based on the market data 

approach. The fact that the commission selected the highest level 

of market data valuation does not render its determination clearly 

erroneous. The commission's valuation of $50,000 has a rational 

foundation and is not based on mere speculation. In the uncertain 

realm of oil and gas lease values, the commission's use of the 

$50,000 per barrel of oil per day is not clearly erroneous. 

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,, 

B. 

The government also challenges the residual mineral value 

used by the commission. The supplemental report stated: 

Id. 

The Commission [u]sed the residual value of 

$410.00 per acre as the value of the minerals to the 

owner of said minerals for leasing in the future upon 

the termination of the lease in force on the date of 

taking; considering bonus and rental. The before taking 

value per acre of minerals would be the same. 

Garb, the landowners' appraiser, concluded that the residual 

value of the minerals was $2,100 per acre. Rosiere, the 

government's appraiser, concluded that the residual value of the 

minerals was $75 per acre. Garb considered the future value of 

the minerals; Rosiere did not. Although the commission was 

skeptical about the likelihood of future production on the 

property, see id. at 3, it expressly considered the future value 

of the leases in determining the residual value, see id. at 4. 

Accordingly, the commission used a value that discounted the 

landowners' assertions of future value: the $410 figure is $1,690 

below the value offered by the landowners. The commission's 

figure accounted for the potential of the leases, unlike the 

government's proposed figure: the $410 figure is $335 above the 

value offered by the government. We hold that the $410 figure is 

supported by the evidence and thus the commission's use of this 

figure was not clearly erroneous. 

c. 

The commission "[c]onsidered the value of equipment in use 

upon the tracts taken." Id. The government argues that the value 

of the equipment should not have been considered for two reasons: 

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l 

first, that the equipment was not taken by the condemnation 

proceeding, and second, that the value of the equipment was 

already included within the $50,000 per barrel of oil per day 

value. The government also contends that the value used by the 

commission is clearly erroneous. 

In this case, the commissioners determined that these fee 

owners were entitled to compensation for the equipment in use on 

the producing wells. The government's argument that the equipment 

was not taken by the condemnation proceeding ignores the premise 

underlying the entire award here: the entire mineral estate was 

taken below a surface elevation of 736 feet. Report of Comm'rs at 

10. In a condemnation proceeding, the owner of the estate is 

entitled to compensation for the value of that which is taken. 

Almota Farmers Elevator and Warehouse co·., 409 U.S. 470, 473-74 

(1973); 2,560.00 Acres of Land, slip op. at 6; Sowards, 370 F.2d 

at 89. Whether this equipment was viewed as fixtures and thus a 

part of the mineral estate or was simply viewed as rendered 

valueless to these mineral estate owners as a result of the taking 

of the equipment, it is nonetheless compensable in this 

condemnation case because the commission determined that it has 

been rendered valueless to these owners of the mineral estate. 

The commissioners are not entitled to rely on their own 

assessment based on the inspection of the property, Merz, 376 U.S. 

at 197; Virgin Islands Y.!. 2.6912 Acres of Land, 396 F.2d 3, 5 (3d 

Cir. 1968), and the record here is sketchy. Nevertheless, there 

is a sufficient basis in the record for determining that the 

commissioners considered independent evidence of the salvage value 

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I 

of the equipment. See Plaintiff's Brief, Appendix, Appraisal of 

Properties for Subordination in Copan Lake Project. The 

commission clearly considered the value of this equipment to these 

landowners as evidenced by its refusal to award compensation for 

equipment value on the Gordon unit where there were no producing 

wells. 

The Supplemental Report of Commissioners refutes the 

government's contention that the value of the equipment was 

included in the $50,000 per barrel per day figure. The $50,000 

per barrel per day figure is a valuation of production only. In 

referring to the $50,000 figure, the commission not only 

designates this value as a production value, but also states: 

"The Commission believed from the evidence the wells on the tracts 

taken would be able to produce to Lessee; the Lessor would be 

allowed a value equal to his percent of the lease." Supp. Report 

of Comm'rs at 4. This language refers clearly to a split of 

production with no indication of the inclusion of any salvage 

equipment value. Further, in reaching the total fair market value 

figure, the commission valued equipment separately from production 

evincing an intent to exclude the value of equipment from any 

production values. The commission was not clearly erroneous in 

awarding compensation and setting a value for equipment in use on 

the tracts taken. 

The district court did not err in adopting the Supplemental 

Report of Commissioners. 

WE AFFIRM. 

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ENTERED FOR THE COURT 

Deanell Reece Tacha 

Circuit Judge 

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