Court Opinion

ID: 3095202
Source: CourtListenerOpinion
Date Created: 2015-10-16 04:28:06.188077+00
Date Added: 2024-06-11T11:51:19.178109
License: Public Domain

In The
              Court of Appeals
Sixth Appellate District of Texas at Texarkana
        ______________________________

              No. 06-09-00046-CV
        ______________________________

ENBRIDGE PIPELINE (EAST TEXAS) L.P., Appellant

                          V.

       AVINGER TIMBER, L.L.C., Appellee

   On Appeal from the 276th Judicial District Court
               Marion County, Texas
              Trial Court No. 0400066

     Before Morriss, C.J., Carter and Moseley, JJ.
             Opinion by Justice Carter
                                                OPINION

I.      INTRODUCTION

        Is the value of a bare and undeveloped tract of rural real estate equivalent to the value of

rural real estate that (1) has been leased by the owner to several gas companies for over thirty years

as a gas processing plant, (2) has more than fifteen pipelines entering the property, and (3) has all

the proper permits for use as a gas processing plant? The condemnor, Enbridge Pipeline, argues

yes. We disagree. We do not believe the bare real estate tract is equivalent to the tract involved

here. From that conclusion, we find the appraiser for the landowner was properly allowed to

testify, and the appraiser for the gas company was properly excluded. We will affirm the

judgment of the trial court.

        Enbridge Pipeline, L.P. (Pipeline) appeals a jury‘s $20,955,000.00 condemnation award to

Avinger Timber, L.L.C. (AV).            Pipeline alleges the trial court erred in:           (1) denying its

Daubert/Robinson1 motion against AV‘s valuation expert, David Bolton; (2) striking its expert,

Albert Allen; (3) denying its motion for directed verdict and motion for judgment notwithstanding

the verdict; and (4) failing to submit its proposed jury instructions. We determine the trial court

was within its discretion in admitting Bolton‘s testimony regarding fair market value of the

condemned property, while excluding Allen‘s testimony for his use of improper methodology.

1
 Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993); E.I. duPont de Nemours & Co. v. Robinson, 923 S.W.2d
549, 556 (Tex. 1995).

                                                       2
Due to our determination of these dispositive issues, and Pipeline‘s failure to preserve any alleged

error in the jury charge, we affirm the trial court‘s judgment.

II.        FACTUAL AND PROCEDURAL HISTORY

           The main issue in this case is the fair market value of AV‘s land on the date it was

condemned by Pipeline. The history of this land is essential in understanding the experts‘

valuations. The condemned land has been owned by the Simpson family and their company, AV,

since the mid-1950s. In 1973, Roland Simpson leased 23.79 acres out of his 418-acre property to

Tonkawa Gas Processing Company2 for the purpose of building and operating gas processing

facilities. The first lease ―was a 10-year lease with a renewal after every 10 years for another 10

years‖ as a continuing option, which indefinitely postponed AV‘s right of reversion. Annual rent

for the land was $500.00.3 Tonkawa built a large natural gas processing plant atop the land in

1973. 4 Fifteen or sixteen separate natural gas pipelines owned by various companies were

connected to the plant over the years, and the site became a known processing hub.

           Tonkawa renewed the lease in 1984, for fifteen years, on the same terms, except that rent

was increased to $4,000.00 per year. Evidence was presented that the Simpsons did not have a

2
    Tonkawa was a private company without the power to condemn.
3
 At the end of the term, Tonkawa and Roland could agree to the amount of rent for the next year term, and absent
agreement, would arbitrate the amount.
4
 The parties stipulated that all improvements under the lease belonged to the lessee. This stipulation did not include
the pipelines built under easements granted to other companies.

                                                          3
complete understanding of what the land was worth at this time.5 Tonkawa sold the plant to Koch

Midstream Processing,6 successor of Tonkawa‘s lease interest, and AV took Roland‘s place as

successor lessor.

           In 1998, these parties renewed the 1984 lease, but on different terms. First, the lease

became a short, three-year term, with the first term ending April 2, 2001, with another three-year

option. The annual rent increased to $22,265.00. A major difference from the earlier leases was

that Koch‘s right of never-ending lease renewals was removed, giving AV a valuable reversionary

interest in the land. According to industry expert Donald W. Niemiec, this major concession was

made with the understanding that ―[i]f [the amount of rent] went to arbitration . . . the rent would be

quite high,‖ approximately $2.5 million per year. He characterized the lease as ―unique in that it

expires. Most all processing plants own it or have a forever lease on it.‖ Upon expiration of the

three-year lease, the lessee had the option of renewing the lease, buying the land, or selling the

lease and/or removing the plant. The lease was renewed in 2001 with an April 2, 2004, expiration

date. Enbridge Processing (Processing) became the natural gas plant operator and successor to

Koch‘s interest in November 2001.7

5
 According to Niemiec, the Simpsons believed the Tonkawa improvements would be valued at $1 million. In fact,
they were valued at $75 million.
6
    Koch was also a private company without power of condemnation.
7
 Enbridge Processing was a private company, whereas Enbridge Pipeline is a public company having the right of
eminent domain.

                                                        4
            With the lease expiration date looming,8 Pipeline (not Processing) sent a March 10, 2004,

$35,685.00 offer to AV for purchase of the fee interest. The letter informed AV it had until

4:00 p.m. on March 12, 2004, to agree to the purchase price or face condemnation proceedings.

On March 11, 2004, Processing merged with Pipeline, a public utility company, and secured the

right to acquire the property through eminent domain. A petition for condemnation by Pipeline

was filed on March 18, 2004. Commissioners awarded AV $47,580.00 for the condemnation

after AV failed to appear at the valuation hearing. AV objected to the commissioners‘ default

award and went to trial on one issue—the fair market value of the condemned acreage.9

            Daubert/Robinson challenges were made to both parties‘ experts, with the main question

being whether the expert was entitled to consider the gas processing plant in valuing the land

underneath it. The trial court answered the question in the affirmative. Because Pipeline‘s

expert valued the land as vacant rural residential property, the trial court struck his testimony,

finding his opinion unreliable and based upon improper methodology. The court also denied

Pipeline‘s motion to strike AV‘s expert and allowed him to testify because he considered all

existing factors in determining the land‘s fair market value. After hearing AV‘s expert testimony,

the jury found the surface interest of the condemned land was worth $20,955,000.00.

            We first consider the trial court‘s Daubert/Robinson rulings.

8
    It is alleged that Processing and AV could not agree on a price for rent when negotiating the lease renewal.
9
 Except for challenges to experts, the record is clear that ―[b]oth parties have agreed to waive all other issues in this
case except for the value and damages caused by this condemnation,‖ including Pipeline‘s right to the taking.

                                                             5
III.   THE DAUBERT/ROBINSON ANALYSIS

       ―[I]t is not permissible for the jury to consider mere speculative contingencies nor is

testimony which ascends to the realm of speculations and fancies that may occur to the minds of

optimistic witnesses concerning the future prospects of [condemned] property and its value

admissible.‖ McChristy v. Hall County, 140 S.W.2d 576, 578 (Tex. Civ. App.—Amarillo 1940,

no writ). The trial court must act as evidentiary gatekeeper to screen irrelevant and unreliable

expert evidence. Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 629 (Tex. 2002). It has broad

discretion with respect to this function. Id.; Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997); In re

Estate of Trawick, 170 S.W.3d 871, 874 (Tex. App.—Texarkana 2005, no pet.). In determining

whether an abuse of discretion occurred in the inclusion of Bolton‘s testimony and the exclusion of

Allen‘s, we look to see whether the trial court acted without reference to guiding principles or

rules. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). We

cannot conclude that a trial court abused its discretion merely because we would have ruled

differently. Id. at 242; Purina Mills, Inc. v. Odell, 948 S.W.2d 927, 932 (Tex. App.—Texarkana

1997, writ denied).

       A.      Standard of Review

       In addition to demonstrating that an expert witness is qualified, the expert‘s testimony must

be relevant to the issues in the case and based upon a reliable foundation. TEX. R. EVID. 401;

Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d 797, 800 (Tex. 2006); Zwahr, 88 S.W.3d at

                                                6
628; Robinson, 923 S.W.2d at 556 (citing Daubert, 509 U.S. 579). The parties do not dispute the

qualifications of either witness. Thus, we look to relevance and reliability.

       Rule 702 of the Texas Rules of Evidence states that if ―technical, or other specialized

knowledge will assist the trier of fact to understand the evidence to determine a fact in issue, a

witness qualified as an expert by knowledge, skill, experience, training, or education may testify

thereto in the form of an opinion or otherwise.‖ TEX. R. EVID. 702. In Kumho Tire Co. v.

Carmichael, the United States Supreme Court suggested that the Daubert standard is flexible and

that the trial court should ―make certain that an expert, whether basing testimony upon

professional studies or personal experience, employs in the courtroom the same level of

intellectual rigor that characterizes the practice of an expert in the relevant field.‖ 526 U.S. 137,

152 (1999). Expert testimony is unreliable if it is not grounded in ―the methods and procedures of

science,‖ and is no more than ―subjective belief or unsupported speculation,‖ or there is too great

an ―analytical gap‖ between the data and the expert opinion offered. Robinson, 923 S.W.2d at

557; Zwahr, 88 S.W.3d at 629; see Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 712

(Tex. 1997). In reviewing the reliability of expert testimony, a trial court does not determine

whether the expert‘s conclusions are correct; rather, the court should determine only whether the

analysis used to reach those conclusions is reliable. Zwahr, 88 S.W.3d at 629; City of Sugarland

v. Home & Hearth Sugarland, L.P., 215 S.W.3d 503, 510–11 (Tex. App.—Eastland 2007, pet.

denied).

                                                 7
       ―Reliability is determined by looking at numerous factors including those set forth in

Robinson and Daubert.‖ Havner, 953 S.W.2d at 712. These include:

       (1) the extent to which the theory has been or can be tested; (2) the extent to which
       the technique relies upon the subjective interpretation of the expert; (3) whether the
       theory has been subjected to peer review and publication; (4) the technique‘s
       potential rate of error; (5) whether the underlying theory or technique has been
       generally accepted as valid by the relevant scientific community; and (6) the
       non-judicial uses that have been made of the theory or technique.

Id. at 714 (citing Robinson, 923 S.W.2d at 557).

       A certified or licensed real estate appraiser is required to comply with the Uniform

Standard of Professional Appraisal Practice adopted by the Appraisal Standards Board of the

Appraisal Foundation, or other similarly strict standards must be used. TEX. OCC. CODE ANN.

§ 1103.405 (Vernon Supp. 2010). Additionally, the appraiser should use an appraisal method

which passes Daubert/Robinson muster. Texas courts have recognized that the comparable sales,

income capitalization, and replacement cost methods meet these standards, as they have been

tested, proven to require objective analysis, widely publicized, subjected to peer review, generally

accepted by appraisers, and utilized in appraisals outside of the courtroom. In re Marriage of

Rice, 96 S.W.3d 642, 647 (Tex. App.—Texarkana 2003, no pet.). These methods are discussed in

detail below.

       If an appraiser utilizes improper methodology or misapplies established rules and

principles, resulting testimony is unreliable, irrelevant, and must be excluded. Zwahr, 88 S.W.3d

at 631 (trial court erred in allowing testimony of appraiser who improperly applied project

                                                   8
enhancement rule); City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 188–89 (Tex.

2001) (Baker, J., concurring) (trial court erred in admitting appraisal of expert who improperly

utilized subdivision development analysis method of appraisal). Further, ―unless an appraisal

gives a value based on the land‘s condition at the time of condemnation -- taking into account all

relevant factors that affect its valuation, including the market for its possible future use -- it is not

relevant to the issue of market value.‖ Id. at 185.

        B.       The Law of Condemnation and Permissible Methods of Appraisal10

        ―Eminent domain has been described as ‗one of the inalienable rights of sovereignty. It is

the power to take private property for public use.‘‖ State v. Ware, 86 S.W.3d 817, 821–22 (Tex.

App.—Austin 2002, no pet.) (citing Fort Worth & D.C. Ry. v. Ammons, 215 S.W.2d 407, 409

(Tex. Civ. App.—Amarillo 1948, writ ref‘d n.r.e.)). ―[I]t is axiomatic that government cannot

take a citizen‘s property without payment of the property‘s fair value.‖ Id. at 822. Thus, both

the United States and Texas Constitutions require governments to compensate landowners for

takings of their property. U.S. CONST. amend. V (requiring ―just compensation‖); TEX. CONST.

art. I, § 17 (―No person‘s property shall be taken, damaged, or destroyed for or applied to public

use without adequate compensation being made.‖). When a government condemns real property,

the normal measure of damages is the land‘s market value. TEX. PROP. CODE ANN. § 21.042(b)

(Vernon Supp. 2010). Where a condemnor‘s offer for the price of land is refused, ―the objective

10
 Pipeline accuses Texas courts of ―conflating‖ the rules involving valuation of fair market value in condemnation
cases and states the Texas Supreme Court ―confus[ed] the issues involved.‖

                                                       9
of the judicial process under the constitution and statutes is to make the landowner whole.‖ City

of Fort Worth v. Corbin, 504 S.W.2d 828, 831 (Tex. 1974); Zwahr, 88 S.W.3d at 628. ―The

general rule for determining fair-market value is the before-and-after rule, which requires

measuring the difference in the value of the land immediately before and immediately after the

taking.‖ Zwahr, 88 S.W.3d at 627.

       The question of market value is ―peculiarly one for the fact finding body.‖ Tex. Elec.

Serv. Co. v. Graves, 488 S.W.2d 135, 139 (Tex. Civ. App.—El Paso 1972, writ ref‘d n.r.e.); City of

Sherman v. Wayne, 266 S.W.3d 34, 46 (Tex. App.—Dallas 2008, no pet.). It is ―defined as the

price the property would bring when offered for sale by one who desires to sell but is not obliged to

do so and bought by one who desires to buy but is under no necessity to do so.‖ Home & Hearth

Sugarland, 215 S.W.3d at 511 (citing Sharboneau, 48 S.W.3d at 182, 189). This is called the

―willing seller -- willing buyer test,‖ which necessarily takes into consideration all factors ―that

would reasonably be given weight in negotiations between a seller and buyer.‖ Id. at 512 (citing

City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808, 814 (1954)). Where appropriate, lost

profits to the condemnee as a result of the taking may also be considered. Wayne, 266 S.W.3d at

45.

       Because a jury can consider ―all uses for which the property is reasonably adaptable and

for which it is (or in all reasonable probability will become) available within the foreseeable

future‖ in determining market value, a condemnee is entitled to present the property‘s highest and

                                                 10
best use.   Home & Hearth Sugarland, 215 S.W.3d at 511 (emphasis added); Bauer v.

Lavaca-Navidad River Auth., 704 S.W.2d 107, 109, 112 (Tex. App.––Corpus Christi 1985, writ

ref‘d n.r.e.) (on property containing established pipeline corridor, highest and best possible use of

severed condemned land was for sale of pipeline easements). Consideration of the highest and

best use ―cannot be given to uses which are purely speculative and unavailable.‖ Home & Hearth

Sugarland, 215 S.W.3d at 511 (citing Cannizzo, 267 S.W.2d at 814). Thus, factors used in the

analysis include legal permissibility, physical possibility, financial feasibility, and maximum

productivity. Id. ―The existing use of the land . . . is its presumed highest and best use, but the

landowner can rebut this presumption by showing‖: ―1. That the property is adaptable to the

other use. 2. That the other use is reasonably probable within the immediate future, or within a

reasonable time.‖ and ―3. That the market value of the land has been enhanced thereby.‖ Zwahr,
88 S.W.3d at 628; Cannizzo, 267 S.W.2d at 814.

       ―Texas law permits landowners to introduce testimony that the condemned land is a

self-sufficient separate economic unit, independent from the remainder of the parent tract with a

different highest and best use and different value from the remaining land.‖ Zwahr, 88 S.W.3d at

628 (citing Bauer, 704 S.W.2d at 109); see also Cannizzo, 267 S.W.2d at 814. When this occurs,

the fair market value of the severed land can be independently assessed without consideration of

the remainder. Zwahr, 88 S.W.3d at 628.

                                                 11
         Once determined, the highest and best use of the property is then taken into consideration

when conducting the appraisal. Texas courts have approved three methods of appraisal. The

first, and most preferred, is the comparable sales method. Home & Hearth Sugarland, 215
S.W.3d at 512 (citing Sharboneau, 48 S.W.3d at 182). This method compares the values of

similar properties in nearby locations.     Rice, 96 S.W.3d at 647. It is typically ―the most

applicable method of valuing single-family houses, townhouses and condominiums.‖                Id.

Courts look to the replacement cost and income approach when comparable sales are not available.

Home & Hearth Sugarland, 215 S.W.3d at 515; see also Cherokee Water Co. v. Gregg Co.

Appraisal Dist., 773 S.W.2d 949, 955 (Tex. App.—Tyler 1989), aff’d, 801 S.W.2d 872 (Tex.

1990).

         Where ―improved property . . . is unique in character and not frequently exchanged in the

marketplace,‖ appraisers can utilize the cost approach, which determines the current cost of

replacing the improved property. Home & Hearth Sugarland, 215 S.W.3d at 515; Rice, 96
S.W.3d at 647. ―After estimating the cost of building the structures on a property, and deducting

an amount for depreciation, the appraiser adds the estimated value of the land and arrives at an

indication of value.‖ Rice, 96 S.W.3d at 647. This type of appraisal is normally conducted when

valuing a building and the land on which it sits.

         Where ―the property, in the open market, would be priced according to the income it

already generates,‖ the income approach is appropriate. Home & Hearth Sugarland, 215 S.W.3d
12
at 515 (citing Sharboneau, 48 S.W.3d at 183). ―By estimating this future income and applying a

capitalization rate, the income approach allows the appraiser to arrive at a present value for the

income-producing property.‖ Sharboneau, 48 S.W.3d at 183. This valuation method is ideal for

rental properties. ―No matter which appraisal method an expert uses, the goal is always to find

the fair market value of the condemned property.‖ Home & Hearth Sugarland, 215 S.W.3d at

515.

       Certain principles apply to all methods of valuation. Because value is determined at the

time of the taking, ―[t]he fact that previous improvements have been made by the condemnor or

others is a factor which it is proper to consider.‖ McChristy, 140 S.W.2d at 577; Ware, 86 S.W.3d

at 822–23 (―[W]here the property is under a lease to a third party, the valuation of the various

estates or leasehold interest is usually determined by ascertaining the market value of the property

with the improvements thereon as though owned exclusively by one party.‖). This ensures the

condemnee receives the current value of the property.

       However, with respect only to the condemned land, the project enhancement rule generally

―provides that the factfinder may not consider any enhancement to the value of the landowner‘s

property that results from the taking itself,‖ to avoid placing the landowner ―in a better position

than he would have enjoyed had there been no condemnation.‖ Zwahr, 88 S.W.3d at 627–28

(citing Corbin, 504 S.W.2d at 830–31). This rule is in accordance with the concept that ―[v]alue

                                                13
to the taker is not the proper guide‖ and avoids a windfall to the condemnee. Id. at 631 (citing

Graves, 488 S.W.2d at 138).

       An exception to the project enhancement rule applies where a condemnor does not

manifest intent to condemn a strip of land, but condemns nearby properties and improves them.

City of Dallas v. Shackelford, 145 Tex. 528, 199 S.W.2d 503, 505–06 (1947); see also Corbin, 504
S.W.2d at 832. In such a case, by the time the condemnor decides to condemn the strip of land, its

value may have potentially increased due to the improvements made by the condemnor on nearby

properties. See Shackelford, 199 S.W.2d at 505–06; Uehlinger v. State, 387 S.W.2d 427, 432

(Tex. Civ. App.—Corpus Christi 1965, writ ref‘d n.r.e.). Because, at the time of the taking, the

price paid by a willing buyer would take into account the nearby improvements, a landowner

would have to be compensated by the condemnor for the increased value of his or her property. In

other words, the ―project‖ in this scenario was the new, previously unannounced project, not the

old, previously existing, ongoing projects. Thus, because the rule prohibits project enhancement,

only consideration of the new ―project‖ is prohibited.

       The basic rules can be summarized in the following fashion:

       1)      the fair-market value of the land is measured at the time of taking;
       2)      the goal is to assess what value a knowledgeable willing seller-willing buyer would
               place on the property;
       3)      the highest and best use must be a use for which the property is reasonably
               adaptable and for which it is (or in all reasonable probability will become) available
               within the foreseeable future;
       4)      previous improvements, not a part of the ―project‖ can be considered if they would
               be considered by a willing buyer or willing seller;

                                                14
         5)       any enhancement to the value of the landowner‘s property that results from the
                  taking itself, i.e., the ―project‖ cannot be considered; and
         6)       the property must be valued using an accepted valuation method.

         With these concepts in mind, we review the experts‘ testimony.

         C.       Bolton’s Opinions

                  1.       Bolton Considered Niemiec’s Opinions

         AV presented two expert witnesses, Niemiec and Bolton. Niemiec had expertise in the

natural gas processing industry, having been president of Union Pacific Fuels, which owned

seventeen processing plants. His experience included analyzing the economics associated with

natural gas processing plants. Bolton was a real estate appraiser. Pipeline moved to exclude

their testimony as unreliable and irrelevant under the Daubert/Robinson standard; the trial court

overruled the motion.11 Although Pipeline does not complain of the trial court‘s ruling with

regard to Niemiec on appeal, Bolton relied upon Niemiec‘s testimony in rendering his expert

opinion. Therefore, an understanding of Niemiec‘s opinions is necessary in order to comprehend

Bolton‘s valuation of the land.

         Niemiec emphasized that the property was unique due to the gas processing plant, the

characteristics of the land, and the type of lease that existed prior to the taking. A gas processing

plant cannot feasibly operate if it is built on a tract of land without access to pipelines to distribute

11
 AV argues that Pipeline waived the point of error that Bolton‘s testimony was unreliable and irrelevant by failing to
object to his testimony. ―To preserve a complaint that scientific evidence is unreliable and thus, no evidence, a party
must object to the evidence before trial or when the evidence is offered.‖ Mar. Overseas Corp. v. Ellis, 971 S.W.2d
402, 409 (Tex. 1998). Because Pipeline objected to Bolton‘s testimony before trial through a Daubert/Robinson
motion to strike his testimony, and the trial court denied its motion, Pipeline‘s point of error was preserved.

                                                         15
the gas, proper permitting to authorize the operation, reasonably nearby gas production anticipated

for a lengthy duration, and the proper amount of electrical supply. The subject tract of land has all

of the necessary infrastructure and characteristics as a result of the operation of a gas processing

plant on this property for more than thirty years, which enhances the value of this tract and

distinguishes it from another nearby vacant tract of rural real estate.

       Niemiec testified that buyers and sellers for this tract of land need to know the details about

the prospect for gas production in the area, the details about the pipelines entering it, whether the

site was permitted, and whether it had outlets for its product. A knowledgeable landowner would

need to know all of the factors associated with the lease, the costs to move, the expiration

conditions of the lease, and other parties that might be interested in leasing or buying the land. He

then discussed many of those factors—in particular, the history of this lease and the unusual

content of the most recent lease which allowed a reversion of the real estate to the landowners

without an option to renew the lease. Niemiec explained that because this lease expired prior to

the taking, the tenant (Processing) had the option to shut down the plant and acquire another site,

move or build another plant, sell to another party, or continue to negotiate with the landowner.

       As an expert in the gas processing industry, Niemiec testified that he evaluated the cost of

moving and building a new plant to be $52 million without considering land costs and permits.

The old plant could be sold for salvage for $14 million, leaving a net cost of moving at $38 million.

Instead of moving, the tenant could build a temporary plant which would partially process the gas

                                                 16
and allow it to meet pipeline specifications. This would involve disassembling the old plant and

moving to the other site at a net cost of $29 million. If the property had the improvements

removed, which Pipeline had a right to do, and we do not speculate as to what action it would take,

Niemiec testified that other companies would be interested in this real estate, and for

approximately $74 million ($22 million for the land and $52 million for the plant) it would own a

property and improvements that were valued at between $165 and $231 million and would

generate income of $16.5 million per year. Thus, many buyers would be interested in this site.12

Niemiec testified that a willing investor would pay from $18 to $22 million for the land, knowing

the lease had expired and what would have to be done to move the plant.

                 2.       Fair Market Value at the Time of Taking

        Bolton stated that he measured the fair market value of the land as of the date of the taking,

which both parties stipulated was April 7, 2004. On that date, the lease had expired, the property

was already improved by the gas processing plant, had a permit to operate, and was benefitted by

fifteen or sixteen pipelines, each with its own easement.13

12
 Niemiec testified the Texas Railroad Commission has record of sixty pipeline companies in the area, all of which
could be considered potential buyers.
13
 While Processing (a private company) made $13 million worth of improvements to the property, the plant was built
by Tonkawa in 1973 and the pipelines were not owned by Processing. In other words, the condemnor did not make
any enhancements on the property. This fact distinguishes many of the cases relied on by Pipeline.

                                                       17
               3.      Willing Buyer-Willing Seller

       Bolton utilized Neimiec‘s research in addressing the willing buyer-willing seller test.

Bolton began with attempting to find comparable sales and agreed that the tract was unique.

Bolton also appraised the property using two income analysis approaches. He testified that to

find land to substitute or be equivalent to this site would require an expenditure of $38 million,

plus the cost of the land. Bolton stated that the land provided a cost savings to a willing buyer

since going to a new site would involve finding one with pipelines entering, obtaining permits, and

doing title work. ―Then you would have to build a plant that -- of $52 million.‖ Bolton shared

Neimiec‘s opinion that this location was unique because it was already permitted, had 138 KB

power provided, was in the middle of a gas field, had fifteen or sixteen pipelines attached, and the

market was not declining. If the plant was removed by the tenant, and the purchase of the land by

a new buyer did not include the plant, the buyer would still save a lot of money because the land

housed the pipelines that would allow the site to control most of the natural gas processing

business. On the other hand, if the tenant decided not to remove the plant because building a new

site would cost more than $50 million, and sold the existing plant for salvage value, the buyer

would save $38 million since buying the salvage of the existing plant would cost $14 million.

               4.      Highest and Best Use Took Into Consideration Previous Improvements

       Bolton determined that the land‘s highest and best use was for an industrial gas processing

plant and that the active market included gas processors. Because the land had been adapted and

                                                18
used in that manner for over thirty years, this highest and best use was foreseeable.              In

establishing the highest and best use of the property and appraising the real estate, Bolton took into

consideration the fact that a gas processing plant had been established for many years and that

fifteen or sixteen pipelines were connected to the property. Pipeline‘s expert agreed the land was

a good site for a gas processing plant.

               5.      Methodology

       Bolton first appraised the real estate using the comparable sales approach. There was not

much dispute that the attributes of this real estate caused it to be one of a kind. Because of this

uniqueness, the use of traditional comparable sales comparisons procedure was a challenging task.

Bolton used the traditional approach in attempting to find other industrial real estate sites. Bolton

testified that he reviewed the differences in the uses, locations, and market conditions between the

subject property and comparable tracts, and adjusted for the unique feature of this tract ―having the

pipelines, the lease and the tenant improvements and the unique location of the 23.79 acres.‖

Based on the comparable sales approach, Bolton appraised the 23.79 acres at $20,955,000.00.

Pipeline‘s expert appraiser, Donnie Sherwood, said he had no criticisms about Bolton‘s

methodology and possessed no information to dispute the figures.

       Considering Niemiec‘s findings, Bolton also used the income approach to ―analyze[] what

a prudent and knowledgeable investor would pay for the leased land, which includes the terms of

                                                 19
the Lease Agreement, considering the gas processing facility must be removed and the land

restored, within a six month period.‖ Bolton explained:

       [W]e take or analyze the amount of income the property can produce, subtract the
       expenses that are necessary to produce that income, and then we do a calculation
       called capitalization, and this is, we use a typical rate of return for that type of
       property to convert it to value . . . analyz[ing] such comparable rental data as are
       available.

This discounted cash flow analysis considered a three-year hypothetical lease, with nominal

annual rents paid at the beginning of each year, followed by a reversion of the land at the end of the

third year. The rental amounts for years one through three were discounted to present value

(based on the date of taking), with the value of the discounted reversions added. The reversionary

interest in this instance was the major value. Using this analysis, Bolton found the market value

of the subject tract as $18.9 million.

       A third method of appraisal by Bolton was the direct capitalization approach, which is

based on one year‘s estimated net operating income derived from a market land lease rate. The

annual lease payment would be based on the cost savings to be realized by the plant owner if a

long-term lease could be entered. Those costs range from $20 million, plus business disruption to

$29 million to $38 million to avoid much of the business disruption. Land lease rates of return for

industrial sites range from 4.8 percent to 10.63 percent. Based on these rates, a reasonable market

rental rate of $1.8 million per year to $2.3 million per year would be yielded. Capitalizing the

                                                 20
annual net operating income using a capitalization rate of 8.0 percent results in a value to the

economic unit including the lease agreement terms as of April 7, 2004, of $22,275,000.00.

       D.      Pipeline’s Complaints

       Pipeline argues that Bolton‘s appraisal improperly: (1) included value of improvements

to the property; (2) analyzed the land‘s value to Pipeline; (3) included project influence;

(4) violated the undivided fee rule; (5) improperly considered Processing‘s business revenues; and

(6) improperly relied on incomparable sales data.

               1.      Value of Improvements Until Time of Taking Can Be Considered

       The record and caselaw demonstrate that AV was entitled to consider the effect of

improvements when determining the fair market value of the condemned land. Contrary to

Pipeline‘s assertions, the experts clarified they did not consider value to Pipeline, but that

knowledge of the value of the unique nature of the property was taken into consideration in

determining the fair market value between a willing seller and willing buyer, which in this case

would most likely be another natural gas pipeline company. Rule 1-2(e) of USPAP rules

provides:

       In developing a real property appraisal, an appraiser must: . . . (e) identify the
       characteristics of the property that are relevant to the type and definition of value
       and intended use of the appraisal, including: (i) its location and physical, legal,
       and economic attributes; . . . (iii) any personal property, trade fixtures, or intangible
       items that are not real property but are included in the appraisal; (iv) any known
       easements, restrictions, encumbrances, leases . . . .

                                                  21
http://www.uspap.org/2010USPAP/USPAP/stds/sr1_2.htm.            Also, Rule 1-4(g) makes clear,

―When personal property, trade fixtures, or intangible items are included in the appraisal, the

appraiser   must   analyze    the   effect   on   value   of   such   non-real   property     items.‖

http://www.uspap.org/2010USPAP/USPAP/stds/sr1_4.htm.

       To assess what effect the improvements had on the land value, Bolton relied upon

Niemiec‘s calculations recited above. Niemiec‘s focus was on potential buyers who would be

interested in the cost savings provided by the unique situation of the expiration of the lease which

occurred prior to the date of the taking. Niemiec reasoned:

       Someone coming in, looking at the situation with the lease expired would look at
       this and say, ―It‘s a great site; I could purchase the lease from the landlord,‖ and
       then the tenant, any tenant, or in this case, [Processing], would have a choice to
       either negotiate now with the new owner of the lease, . . . or they would simply
       continue on and move their -- remove their site, remove their improvements, their
       plant from this site per the lease.

―The pipelines out of the plant are pipelines that would be able to be utilized by any third party.

And the gathering system contracts would allow the producer to move the gas to the plant site.‖

The savings advantage to the potential buyer could also be used to negotiate a higher rent from

AV‘s standpoint. According to Niemiec, ―knowing what I know about the site and the lease, . . .

[a potential buyer] would be willing to put up a minimum of $18 million for the‖ surface land

because ―the pipeline is coming in; the pipeline is going out; the air permits; the electrical power

that‘s there; the customers are all still there.‖ He also testified the land was worth that much

because it ―has been prepared, and it has the infrastructure to handle all of these incoming and

                                                  22
outgoing pipes.‖ Even if the investors paid $22 million for the real estate, a new plant could be

built on this site that is already permitted and has the incoming pipelines for $50 million, resulting

in a total investment of $72 million to acquire a plant worth between $165 million and $231

million.

       We find that to properly appraise this real estate, one cannot ignore the fact that a gas

processing plant is and has been established on it for more than thirty years. It is true that this is

an extremely unusual situation (that a major processing plant is built on real estate on which the

lease has expired with no option to renew), but the appraisers and this Court must acknowledge the

existing facts; it is not improper to consider any effect the improvements and the expiring lease

have on the value of the underlying real estate.

               2.      Bolton Did Not Use Value to the Taker

       Bolton testified that he did not assess value to Pipeline and that if he had, AV would have

asked for more since the plant and land together were valued between $165 million and $231

million.

       Pipeline complains ―Bolton plays upon the land‘s special value to Enbridge by asserting

there would be a ‗free-market‘ to buy the surface of land and resell it to Enbridge at a hold–up

price.‖ We find nothing in the record to support the notion that Bolton‘s analysis envisions

attempting to resell the land to Pipeline.

                                                   23
       Next, Pipeline argues that Bolton‘s testimony violated the ―first‖ kind of project influence

by considering the special value of AV‘s land to Pipeline‘s public project. In doing so, Pipeline

argues that Bolton considered Pipeline‘s costs and profits in operating the plant and speculated

about its business decisions. Pipeline also argues that AV is attempting to recover the costs to

Pipeline, rather than the fair market value through Bolton‘s reliance on possible costs to move the

plant to another location. Pipeline complains Bolton erroneously includes testimony of ―cost

savings‖ or what Pipeline refers to as ―opportunity cost.‖ This is an argument that Bolton

assessed value to the taker.

       In support of its argument, Pipeline cites Northwest Pipeline Corp. v. 95.02 Acres of Land,

more or less, in Power County, Idaho, No. CV-01-628-E-BLW, 2003 WL 25768634 (D. Idaho

Dec. 19, 2003) (mem. op. & order). Even if this case (an unpublished federal district court ruling

on a motion in limine) had precedential value, it is far different from the case at hand. In

Northwest Pipeline, the pipeline company condemned property on an Indian reservation which

already had an easement. The offer of proof was the alternative cost of rerouting the pipeline

hundreds of miles completely off the reservation. The district court properly found that such

alternative cost was not a measure of the market value of the real estate.

       In Northwest Pipeline, the evidence of the cost of placing a pipeline completely off the

Indian reservation had no relation or bearing on the market value of the property. By contrast, the

evidence of cost here related to a determination of the market value of the real estate upon which a

                                                24
gas processing plant has been operational for many years. Both Bolton and Niemiec testified to

costs of moving and building a new plant, but we understand that evidence was presented in an

effort to display what a willing, knowledgeable buyer would pay for the land. Such testimony is

relevant in considering the financial feasibility of a property, the highest and best use of the

property, as well as an appraisal of what a knowledgeable buyer would pay. The experts

identified more than sixteen other potential buyers in this market, including many other gas

companies that have direct ties to the East Texas oil field, as well over sixty gas pipeline

companies.

       Pipeline urges it is unfair that a condemnor be required to pay the enhanced price which its

demand alone has created. It complains that AV is attempting to obtain a special value to the

condemnor as distinguished from others who may or may not have the power of eminent domain.

United States v. Cors, 337 U.S. 325 (1949). Pipeline cites cases in which the same government

entity condemning the property was asked to pay for a leasehold, easement, or other right which it

owned prior to condemnation, on the basis that the continued revenue was expected. However, in

these cases, there was no evidence that there was a market which would be available to purchase to

the interest. Rather, the condemnor either created demand for the property or was the sole market

for the property. Thus, these cases did not allow evidence of the owner‘s special need in the

property. Id. at 333 (government should not have to pay enhanced value for tug boat in time of

war where market prices were inflated for war vessels due to government‘s need for them during

                                               25
war time); United States v. Weyerhaeuser Co., 538 F.2d 1363, 1366 (9th Cir. 1976) (company not

entitled to payments for use of road owned by private company leading to federal timberland

where government had exclusive licenses to use road prior to condemnation); see also Graves, 488
S.W.2d at 136–38 (condemnor‘s cost to construct future transmission line irrelevant to fair market

value of easement for electrical transmission line on date of taking).

       Here, the action of Pipeline in condemning this property did not create a special need

demand for the real estate; that market had been created by years of use of the real estate as a gas

processing plant. For thirty years, other companies constructed the improvements and used this

property for gas processing. The evidence shows there is a large demand for natural gas which

must be processed before entering the pipelines for delivery to consumers. Many companies are

profitably conducting such business. While the unique circumstances of this lease expiration may

have presented a rare opportunity for competing companies to attempt to acquire this real estate,

the value of the real estate is not a result of the condemnation and does not depend on Pipeline

either continuing operation or removing its property.

       Our conclusion was supported many years ago, when the Supreme Court of the United

States addressed an analogous situation in Boom Co. v. Patterson, 98 U.S. 403 (1878). In earlier

days, the rivers, especially the Mississippi River, served as major transportation avenues for

commercial goods. Logging was an industry that apparently relied on the Mississippi River for

transportation to the market. Patterson owned three islands located in the Mississippi River,

                                                26
enabling him to construct a boom (a series of chains or cables, or timbers to confine floating

timber) attached to the west bank of the river capable of holding over twenty million feet of logs.

This added great value to the three islands. Id. at 408. The condemning authority also planned to

use the three islands as a boom; it argued that the adaptability of this land for use as a boom should

not be considered since only the Boom Company was authorized to receive and manage timber on

the Mississippi River. The Supreme Court found that such authority did not apply to timbers of

parties ―choosing to keep the control and management of them in their own hands.‖ Id. at 409.

Consequently, the three islands were valuable for use as a boom, not only to the condemning

authority, but also to other parties; therefore, the property could properly be evaluated to include

that enhanced value.

       While we recognize the difference in this case is that AV owns only the real estate and not

the improvements, the reasoning of the Boom Co. case concerning the value to the taker argument

is applicable. The value of this real estate as a gas processing plant site is not exclusive to

Pipeline. Therefore, Bolton‘s assessment was of the fair market value, not the value to the taker.

               3.      Bolton Did Not Violate the Project Influence Rule

       Bolton testified he did not take into consideration the effect of the condemnation

proceeding, negating Pipeline‘s application of the project influence rule.          Pipeline did not

manifest intention to condemn the property until the March 10 letter. Therefore, because there

was no further Pipeline ―project,‖ Bolton concluded the project enhancement rule did not apply,

                                                 27
and he took into consideration, in accordance with Rule 1-2(e), the fact that the land housed a

multi-million dollar plant and was subject to the pipeline easements. He assumed, because it

would be financially unfeasible for Pipeline to remove the gas processing plant,14 that it would

renew the lease, or that another company would lease the site. He based his opinion on what the

annual market rent lease payment would be, taking into account cost savings that a potential plant

owner would realize on a long-term lease. Bolton appraised the surface interest in the 23.79 acres

as $20,955,000.00.          Bolton made clear that while the improvements were taken into

consideration, he did not actually appraise them; rather, he considered the improvement values to

aid his conclusion in determining the fair market value of the surface land underneath them.

                  a.       Pipeline Built No Improvements; Therefore, Consideration of the
                           Processing Facility Does Not Violate Project Enhancement Rule

         Pipeline cites many cases, both federal and state, with respect to the issue of project

influence. Some of the cases are distinguishable because they involve fact patterns in which the

condemnor built projects in surrounding areas while indicating intent to condemn the subject

property. Corbin, 504 S.W.2d at 831 (―enhancement is allowed up to the time that the condemnor

manifests a definite purpose to take the particular land‖). Here, the landowners could only

include previously built projects when assessing the fair market value of their property on the date

of the taking if they existed before the condemnor manifested desire to condemn. Shackelford,
199 S.W.2d at 505–06 (concluding ―it was entirely proper for the jury to take into consideration
14
 Bolton and Niemiec testified it might cost $38 million to move the plant and up to $52 million if business disruption
was taken into account.

                                                         28
[the property‘s] enhanced value [from existing public marketplace project]‖ ―in view of the fact

that there was no definite purpose manifested by the City to take [the subject property]‖ until later).

Here, the condemnor, Pipeline, did not build any improvements. Therefore, these cases are not

controlling.

               b.      AV Is Not Seeking Value of Processing Facility: This Is Not a Fixtures
                       Case

       Other cited cases all contained a common, distinguishable fact pattern where a condemnor,

under a lease or otherwise, built improvements for which the landowner sought compensation.

Etalook v. Exxon Pipeline Co., 831 F.2d 1440 (9th Cir. 1987); United States v. Delaware, L. &

W.R. Co., 264 F.2d 112 (3rd Cir. 1959); Anderson-Tully Co. v. United States, 189 F.2d 192 (5th

Cir. 1951); Old Dominion Land Co. v. United States, 296 F. 20 (4th Cir. 1924).

                       i.      Anderson-Tully

       Pipeline relies most on Anderson-Tully, but the analysis of that case distinguishes all the

above-cited cases. In Anderson-Tully, the government leased property and built a piling structure

thereon. The lease required improvements to be removed at the end of the lease term. Id. at

194–95.    After expiration of the lease, the government decided to condemn the property.

However, in Anderson-Tully, the landowner claimed that the law of fixtures and contract

converted the piling structure to realty which should have been included in the award for just

compensation. Id. at 196. The landowner sought to introduce evidence of the cost of replacing

the condemned area. The court in Anderson-Tully pointed out that

                                                  29
       the character of the evidence sought to be adduced was not ―reproduction‖
       evidence in the usual sense, that is relating to the cost of reproducing structures or
       other improvements to the land, but was evidence as to the estimated cost which
       would be incurred if someone wished to fill and otherwise improve an adjacent
       tract of land in order to make it physically identical to the land taken.

Id. at 195. Here, AV never sought to introduce evidence of the cost to obtain easements and

install pipelines, proper power lines, etc., to make another tract physically identical, but since the

highest and best use of the property was for a gas processing plant, evidence of the cost of the plant

to a third party that might buy the real estate was relevant and altogether different from the type of

evidence sought to be presented in Anderson-Tully.

                       ii.     United States v. Delaware, L. & W.R. Co.

       Pipeline relies heavily on United States v. Delaware, L. & W.R. Co., 264 F.2d 112. There,

the railway company owned land that was leased to Hoffman Machinery for fifteen months during

the Korean War, which was used to manufacture large caliber shells. Hoffman had a contract

with the government that included reimbursement for improvements placed on the property which

enhanced its value by $250,000.00 to $300,000.00. All improvements were paid for by the

government. The government began condemnation proceedings in August 1954. Delaware

L.W.R. argued that it should receive the enhanced value of the property. In other words, the

government would be required to pay the railway for the enhanced value of the property after it

had paid for the installation of the improvements giving rise to the enhancement. The lease

between Hoffman and the railway allowed it to remove all improvements at the lease expiration.

                                                 30
First, the court held that whether the lessee would have actually removed the improvements was

not relevant; rather, the issue was what the reversioner was entitled to at the end of the term. The

court further held that the government was placed in the position of the lessee by reason of its

contract to indemnify Hoffman for the costs of improvements. Even if the improvements were

considered fixtures attached to the realty, special considerations in a condemnation case are

present when the government caused the improvements to be made originally. The court held that

the fixtures law has no application in such a situation.

       The most obvious differences with Delaware, L. & W.R. are: (1) the landowner was

asking the government to pay the enhanced value even though the government had originally

installed all improvements, whereas here the enhancement was from prior private tenants as well

as third parties adding the adjacent pipelines which fed gas to the plant; and (2) the issue of fixtures

is not involved in this case.

       We agree with the Delaware, L. & W.R. opinion that the relevant issue is not the cost that

might be incurred by Pipeline by removing the entire structure or taking other measures. The

issue is the value of the real estate that reverts to AV after Pipeline either removes all the property

or attempts some other measures.

                                                  31
                           iii.     Pipeline’s Other Cited Cases Do Not Apply

         The last category of cited cases does not apply.15 United States ex rel. and for Use of

Tenn. Valley Auth. v. Powelson, 319 U.S. 266 (1943) (landowner cannot recover consequential

damages of lost business earnings as result of condemnation); Tex. Elec. Serv. Co. v. Lineberry,

162 Tex. 570, 349 S.W.2d 105 (1961) (expert improperly used capitalization appraisal approach to

value sale of easement where there was no evidence it was previously an income-generating

property); Tex. & New Orleans Ry. Co. v. Sutor, 56 Tex. 496 (1882) (trespass to try title suit

finding landowner who permits railroad company to build roads on land without charge on

condition that ditches be constructed to carry off water cannot declare right-of-way forfeited for

failure to meet conditions after seventeen years); McAshan v. Delhi Gas Pipeline Corp., 739
S.W.2d 130 (Tex. App.—San Antonio 1987, no writ) (where land‘s current use was for ranchland

at time of taking, evidence that property would be ideal for compressor site, and valuation thereon

was irrelevant).

         In this case, AV agrees that the processing plant belongs to Pipeline and is not seeking

compensation for this improvement. Here, the cost testimony related to the amount a purchaser

of the real estate would expect to spend to build another gas plant if Pipeline removed it. The
15
  Pipeline also cites extensively to Zwahr, 88 S.W.3d 623. In that case, error stemmed from the fact that the expert
looked only to the part taken to determine that the highest and best use of the property was for a pipeline easement.
Id. at 626. However, unlike this case, the property taken in Zwahr was not a separate economic unit. Id. Because
the economic unit‘s highest and best use was farmland or rural-residential, and the expert failed to evaluate the whole
economic unit, his opinion was unreliable. Id. at 626–27; Bulanek v. Westtex 66 Pipeline Co., 209 S.W.3d 98,
99–100 (Tex. 2006). In this case, the part taken is a freestanding economic unit, as demonstrated by its usage. 23.79
acres had been used for the gas processing plant for years and the additional 4.5 acres were needed for access. Zwahr,
88 S.W.3d at 626–27.

                                                         32
relevance of this testimony was to show that another gas processor could spend $52 million to

rebuild a new plant on the property, buy the real estate for $22 million which already had all the

infrastructure needed for gas processing, and result in a savings to the potential purchaser, who

would then own an entire gas processing facility worth $165 to $231 million. Because Bolton did

not take into consideration the effect of the condemnation proceeding, he did not violate the

project influence rule.

                  4.        The Undivided Fee Rule Does Not Apply

         Pipeline claims Bolton‘s testimony violated the undivided fee rule. The rule is simple:

Where there is more than one interest in a property, i.e., a fee interest and a leasehold, both the fee

holder and leaseholder are entitled to compensation. The fair market value of the property as a

whole with improvements must first be assessed and then divided according to the respective

interests. In other words, the value given to both the fee holder and interest holder when

aggregated cannot exceed the fair market value of the property. Ware, 86 S.W.3d at 822–23.16

Again, this rule ensures no party receives a windfall. At the time this property was taken, the

lease had expired and the lessee‘s remaining right or duty was to remove the improvements within

16
  ―Where there are different estates in the property or where the property is under a lease to a third party, the valuation
of the various estates or leasehold interest is usually determined by ascertaining the market value of the property with
the improvements thereon as though owned exclusively by one party, and, in the absence of damages to other property
not taken, this ordinarily determines the extent of the liability of the party condemning the property.‖ Ware, 86
S.W.3d at 822–23.

                                                           33
six months. We find that the undivided fee rule does not apply.17 The only party entitled to

compensation was AV, as Processing‘s right to use the property had expired prior to

condemnation.

                     5.       Bolton Did Not Consider Pipeline’s Business Revenues

            Pipeline next argues that Bolton‘s decision to value the property‘s highest best use as a

natural gas processing plant, taking into consideration Pipeline‘s business revenues, violated the

value to the taker rule. Pipeline relies on State v. Central Expressway Sign Associates, in which

the State condemned Central‘s billboard easement leased to a third party. 302 S.W.3d 866, 869

(Tex. 2009). There, the trial court excluded the expert‘s valuation testimony since he did not take

the lessee‘s business revenue into consideration. The Texas Supreme Court found that to be

error. Id. In Central Expressway Sign, the State had settled its condemnation suit against the

lessee by paying just compensation in the form of relocation benefits. Id. In other words,

because the only interest that had to be valued was the lessor‘s interest, and the lessor did not have

any interest in the lessee‘s lost profits, evidence of the lessee‘s business revenues was irrelevant.

Here, there is no evidence in the record that Bolton relied on Pipeline‘s business revenues.

Instead, Bolton estimated cost savings to a potential purchaser of the land in order to calculate the

financial feasibility factor to determine the property‘s highest and best use in evaluating fair

17
     The jury correctly assessed fair market value of the condemned property as a whole.

                                                           34
market value. Pipeline‘s expert Sherwood agreed that an appraiser may adjust for cost savings to

a potential buyer when considering land value.

               6.      Bolton’s Comparable Sales Data

       Finally, Pipeline contends Bolton improperly relied on incomparable sales data. Bolton

examined land sales of industrial sites in several Texas counties between September 2002 and

April 2006.    In his expert report, Bolton lists six comparable sales transactions involving

industrial tracts. The sales prices were in a range from $5,500.00 to $21,905.00 per acre. There

was evidence that for any company to build an equivalent plant, it would incur a cost of $52

million. However, a plant cannot feasibly operate if it is built on a tract of land without access to

pipelines to distribute the gas, proper permitting to authorize the operation, reasonably nearby gas

production anticipated for a lengthy duration, and the proper amount of electrical supply. The

subject tract of land has all of the necessary infrastructure and characteristics as a result of the

operation of a gas processing plant on this property for more than thirty years, which enhances the

value of this tract and distinguishes it from another nearby vacant tract of rural real estate.

Niemiec‘s testimony was that a willing buyer, understanding these facts, would invest $18 to $22

million for this real estate. If the property had the improvements removed, which Pipeline had a

duty to do, and we do not speculate as to what action it would take, Niemiec testified that other

companies would be interested in this real estate, and for approximately $74 million ($22 million

for the land and $52 million for the plant) it would own a property and improvements that were

                                                 35
valued at between $165 and $231 million and would generate income of $16.5 million per year.

We believe it was proper to consider this evidence and make adjustments in appraising the real

estate.

                 7.     Trial Court Did Not Err in Denying Pipeline’s Motion to Strike Bolton’s
                        Testimony

          In summary, Bolton assessed the fair-market value of the land based on the willing

seller-willing buyer test as of the stipulated date of the taking. His assessment of the land‘s

highest and best use as a gas processing facility was the reasonable and foreseeable presumed

highest and best use.       Because the gas processing facility, pipeline easements, and other

improvements were in place prior to the date of the taking, Bolton determined their impact on the

fair market value of the land, since such assessments would be considered by a willing buyer.

There were no enhancements in value resulting from the actual condemnation, and value to the

taker was not utilized. Finally, Bolton utilized the accepted income approach valuation method,

yielding a figure using a methodology unchallenged by Pipeline‘s experts. Based on the record

and precedent before us, we conclude that the trial court did not abuse its discretion in finding

Bolton‘s testimony regarding market value relevant, reliable, and thus, admissible. Pipeline‘s

first point of error is overruled.

          E.     Application to Pipeline’s Expert, Albert Allen

          Allen determined that the condemned land‘s highest and best use was for rural residential

purposes. He stated in his deposition that he did not analyze any other use. Further, Allen

                                                 36
admitted that he did not take into consideration any pipelines, easements, permits, etc., because he

was told to value the land as vacant. Allen‘s fair market value for the property was $47,940.00.

       AV objected to the inclusion of Allen‘s testimony on the grounds, among others, that he:

(1) used an incorrect highest and best use for the property; (2) failed to analyze the income

approach; (3) assumed the property was barren, and did not take into consideration the effect of

improvements listed under USPAP Rules 1-2 and 1-4. Essentially, AV complained that Allen

valued the property as it existed in 1973.

       ―The existing use of the land . . . is its presumed highest and best use.‖ Zwahr, 88 S.W.3d

at 628. Pipeline argues that a jury may decide between two highest and best uses. While true, in

order to be considered as a relevant highest and best use, use of the property as rural residential

must be reasonably adaptable within the foreseeable future. Wayne, 266 S.W.3d at 45; Bauer,
704 S.W.2d at 109, 112 (on property containing established pipeline corridor, highest and best

possible use of severed condemned land was for sale of pipeline easements). Pipeline was

required to meet the burden to defeat the presumption that the current use was the best use by

showing it was legally permitted, physically possible, and financially feasible for the property to

be considered rural residential and that such classification would yield maximum productivity.

Zwahr, 88 S.W.3d at 628.

       The property has been granted permits to operate as a natural gas facility. There is no

evidence indicating that the 23.79 acres would be classified as residential property in the

                                                37
foreseeable future. Bolton testified that residential properties could not be built where the

pipelines existed due to the pipeline easements. Use of property for residential purposes would

likely not be legally permitted. Nevertheless, Allen‘s ―conclusions assume[d] that a zoning

change would be likely.‖18 In order to prepare the site for residential use, the existing gas plant

would have to be torn down and the property prepared for multiple housing. Allen did not explain

why the existing use of the property would not continue as the highest and best use, did not explain

why he overlooked the thirty-year history of that use, and did not consider the effects of the

easements or how building residential units was financially feasible. The trial court found

Allen‘s opinion attempted to ―create [a] total fiction, appraisal in a vacuum.‖ While use as

residential property could theoretically be physically possible, it would not be financially feasible.

Consideration of the highest and best use ―cannot be given to uses which are purely speculative

and unavailable.‖ Home & Hearth Sugarland, 215 S.W.3d at 511 (citing Cannizzo, 267 S.W.2d

at 814).

         ―Unless an appraisal gives a value based on the land‘s condition at the time of

condemnation -- taking into account all relevant factors that affect its valuation, including the

market for its possible future use -- it is not relevant to the issue of market value.‖ Sharboneau,
48 S.W.3d at 185. Not only did Allen fail to explain why the existing use of the property would

not be presumed as the highest and best use, his opinion did not offer fair market value of the land

18
  It is unlikely that zoning is involved as the property is located in a rural area and does not appear to be within the
jurisdiction of any municipality.

                                                          38
based on its condition at the time of the condemnation and did not account for all relevant factors

affecting valuation. The trial court was within its discretion to conclude Allen‘s opinion was

unreliable. Zwahr, 88 S.W.3d at 631. We overrule Pipeline‘s second point of error.

IV.     PIPELINE WAS NOT ENTITLED TO DIRECTED VERDICT AND JNOV

        Pipeline‘s arguments with respect to directed verdict and judgment notwithstanding the

verdict are both based on the premise that Bolton‘s testimony should have been excluded. It

argues that absent Bolton‘s testimony, there was no basis for the jury award of $20,955,000.00.

Thus, Pipeline claims that the trial court should have directed verdict in AV‘s favor only in the

amount of $300,000.00. We have already determined that the trial court did not err in admitting

Bolton‘s testimony.

        The standard of review for both judgment notwithstanding the verdict and the denial of a

directed verdict is a legal sufficiency or ―no evidence‖ standard of review. Mauricio v. Castro,

287 S.W.3d 476, 478 (Tex. App.—Dallas 2009, no pet.); Home & Hearth Sugarland, 215 S.W.3d

at 516 (citing Sherman v. First Nat’l Bank in Center, Tex., 760 S.W.2d 240, 242 (Tex. 1988)). In

this case, a directed verdict or judgment notwithstanding the verdict for Pipeline would only be

proper if AV failed to present any evidence raising a fact issue entitling it to recover the fair market

value as assessed. Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex.

2000). We will review the evidence in the light most favorable to the jury‘s finding, crediting

favorable evidence if reasonable persons could, and disregarding contrary evidence unless

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reasonable persons could not. City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005); Home

& Hearth Sugarland, 215 S.W.3d at 515.

       Aside from Bolton‘s valuation testimony, the jury heard from another industry expert.

Niemiec had been involved in the oil and gas industry since the 1970s. He graduated from

Princeton, attended the advanced management program at Harvard Business School and Cornell

University, worked for Exxon and then Union Pacific Fuels, eventually becoming the president of

that company. Niemiec‘s responsibilities included project approvals and oversight of seventeen

processing plant sales, in which he acquired the skills to understand the ―microeconomics of

processing plants.‖    He possessed unique skills in evaluating what a potential natural gas

company would consider when purchasing property.             Niemiec‘s testimony, which was not

challenged on appeal, was that a willing buyer would pay between $18 million and $22 million for

the land only. Thus, the trial court did not err in overruling Pipeline‘s motions for directed verdict

and judgment notwithstanding the verdict, given this record. Pipeline‘s third point of error is

overruled.

V.     FAILURE TO PRESERVE ERROR REGARDING JURY INSTRUCTIONS

       The entirety of Pipeline‘s argument with respect to this point of error states:

       Because the trial court improperly allowed Mr. Bolton‘s conclusions of value over
       proper objections, the court should have allowed the jury to be properly instructed
       on the foregoing legal principles. The requested and refused instructions were
       submitted to the court prior to the ultimate preparation of the jury charge and
       argument to the jury. These instructions, reflecting the principles set out above,
       are part of the record at CR 7:547-568; App. Ex. 4.

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       Rule 38.1(i) of the Texas Rules of Appellate Procedure requires that a brief contain ―a clear

and concise argument for the contentions made, with appropriate citations to authorities and to the

record.‖ TEX. R. APP. P. 38.1(i). Bare assertions of error, without argument or authority, waive

error. Bufkin v. Bufkin, 259 S.W.3d 343, 354 (Tex. App.—Dallas 2008, pet. denied); see

Fredonia State Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279, 284–85 (Tex. 1994) (discussing

―long-standing rule‖ that point may be waived due to inadequate briefing). Pipeline fails to cite

any authority for this point of error in its brief. It does not discuss why each particular instruction

was necessary and proper. Thus, we conclude Pipeline‘s brief is inadequate with respect to this

point of error and presents nothing for review. We overrule its last point of error.

VI.    CONCLUSION

       We affirm the judgment of the trial court.

                                               Jack Carter
                                               Justice

Date Submitted:        June 30, 2010
Date Decided:          October 27, 2010

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