Opinion ID: 2829573
Heading Depth: 2
Heading Rank: 2

Heading: David Bolton

Text: The Court says that in his appraisal report Bolton “concluded that a prudent and knowledgeable investor, considering Enbridge Pipeline’s cost savings, would pay between $21,750,000 and $28,500,000 for Avinger’s interest” and that “[t]he only interest that should have been appraised was Avinger’s interest in the land. However, . . . this was not the interest that was valued in Bolton’s report.” ___S.W. 3d at ___. But Bolton’s report was not introduced into evidence at trial. The valuation testimony the jury heard from Bolton was that the market value of the property was $20,955,000 if the Enbridge plant did not exist or had been “swept away by a tornado.” That value did not include any amount attributable to the plant, Enbridge’s obligation to remove it, or cost savings to Enbridge if it did not have to remove it. Bolton specifically testified 7 that he appraised the tract and formed his opinion of its market value based on “typical market participants,” and not on its special value to Enbridge as the taker, or its value to Avinger as the seller: Q: Now, is the - in the definition [of market value], it asked about the price of a seller willing to sell and a buyer willing to buy. Is it the value to Avinger Timber or the value to Enbridge Pipeline Company that you’re trying to appraise? A: No. We’re appraising the value of the property. Q: And is it the value to that mythical seller in the definition whose name is not given and the mythical buyer? A: It’s to typical market participants. Q: Do you know why, in the definition of appraisal, that it doesn’t set forth the particular value to the owner or the particular value to a specific person? A: Well a value to a particular person or a particular entity may have something special over and above or less than typical market participants. So that may be a value to that person, but it wouldn’t be a value in exchange. Just as Niemiec did, Bolton explained that the site was valuable because of its physical location in a highly productive gas field, the existing pipeline infrastructure that included fifteen or sixteen pipelines through which gas arrived at the site for processing, the existing electrical supply to the property, and the fact that the site was already permitted for operation of a gas processing plant. His opinion was that the property would be an attractive investment for gas processing businesses because it would allow a buyer to begin processing gas at least a year sooner than if the buyer purchased a new site, obtained permits for it, and constructed a new plant. Further, a buyer of the property would not have to contend with the creation of a pipeline infrastructure for a new 8 processing site or start competing for customers. His testimony of $20,955,000 value was based on two separate income analyses and a comparable sales analysis. Niemiec and a consultant named Jeff Spearman2 provided Bolton with cost estimates for Enbridge to remove its plant and relocate it to another site. The minimum estimated cost for Enbridge to do that was $29 million which included building a temporary plant on the property to process a reduced amount of the gas received at the property while Enbridge located, acquired, and permitted a new site, then moved its existing plant. The temporary plant scenario was discounted by Niemiec as a poor choice at best because it would reduce Enbridge’s processing revenue significantly and disrupt operations of the producers supplying gas. Bolton understood from Niemiec that under the best and most viable scenario for Enbridge, if it did not buy the property or execute a new lease with Avinger at market rates, it would incur a minimum $38 million cost. That cost included Enbridge leaving the existing plant where it was and continuing to process gas at a normal rate while it built another plant close by and then selling the existing plant for salvage. Leaving its plant in place and building a new one would allow Enbridge to continue capturing the full amount of revenue from the gas processing business while it transitioned to a new plant—a time estimated to be at least 12 months and likely 18 to 24 months—and would avoid disrupting the business of its gas suppliers and incurring their ill will as well as losing some or all of the revenue for processing gas. This latter scenario apparently was the most probable from Enbridge’s point of view, also. Avinger presented the testimony of Kyle Hart, who worked in management at Enbridge’s 2 Spearman worked for a consulting company that specialized in mid-stream gas processing. 9 plant. Hart testified that it would have cost Enbridge an estimated $20 million to move the plant and that cost made moving it prohibitive. The only value testimony Bolton gave relating to cost savings to Enbridge was that the value of the property to Enbridge would have been much greater than the $20,955,000 he concluded was its market value absent the plant. In giving that testimony Bolton did not refer to the higher appraisal numbers in his report, even though at one point he was specifically asked about the property’s value to Enbridge as opposed to its value to a third party buyer. His opinion was that it would be greater to Enbridge because of Enbridge’s cost savings: Q: If you had been asked in this case -- if this were not a condemnation case, but you were asked to do an appraisal of what the value of this property was to the tenant, would it have been more or less than your opinion of the value to a willing buyer? A: No. It would have been more. Q: And explain to the jury why you say that. A: Well, their cost savings would be something like $38 million if -- considering the lease and considering their position to construct a new land [sic] less the salvage. And I believe Mr. Niemiec’s numbers are $38 million. I think that would represent that scenario. Q: Focusing you on other buyers -- not Enbridge, focusing you on other buyers, are the Enbridge costs to relocate the plant or the tenant costs to relocate the plant relevant to those other buyers? A: Sure. Q: Why? Can you explain that to the jury? A: Sure. Because anyone looking to buy this is -- and the lease was terminating, and they - and if the tenant had to move, then they’re faced with relocating at a net cost of at least $38 million. Well, if a prospective buyer can come in because of the location . . . of the pipelines and because of the amount of actual business that goes 10 through that site, would -- any dollar amount that they can buy that for substantially less is going to be a factor they consider, I think.