Court Opinion

ID: 3135409
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:36:57.745395+00
Date Added: 2024-06-11T11:54:09.825158
License: Public Domain

Docket No. 102318.

                             IN THE
                     SUPREME COURT
                                OF
                THE STATE OF ILLINOIS

THE KANKAKEE COUNTY BOARD OF REVIEW, Appellant, v.
  THE PROPERTY TAX APPEAL BOARD et al., Appellees.

                    Opinion filed June 7, 2007.

   JUSTICE BURKE delivered the judgment of the court, with
opinion.
   Chief Justice Thomas and Justices Fitzgerald, Kilbride, Garman,
and Karmeier concurred in the judgment and opinion.
   Justice Freeman took no part in the decision.

                             OPINION

     Section 1–130 of the Property Tax Code (Code) defines taxable
property as “[t]he land itself, with all things contained therein, and
also all buildings, structures and improvements, and other permanent
fixtures thereon, *** and all rights and privileges belonging or
pertaining thereto, except where otherwise specified by this Code.” 35
ILCS 200/1–130 (West 2004). In the instant case, petitioner
Kankakee County board of review assessed the property of
respondent Natural Gas Pipeline Company of America (taxpayer1) for
the tax years of 2000 and 2001. In its assessments, petitioner included
the value of the rights and privileges taxpayer enjoys to two gas
storage reservoirs that lie under the surface property of others.
Taxpayer appealed these assessments before the Property Tax Appeal
Board (PTAB) which found that the rights and privileges to the
reservoirs should not have been assessed to taxpayer’s property. The
PTAB then reduced the property’s assessed value for each year. The
appellate court confirmed the decision of the PTAB.
    We granted petitioner’s petition for leave to appeal (210 Ill. 2d R.
315) and permitted the Central Illinois Public Service Company,
Central Illinois Light Company, Centerpoint Energy-Mississippi River
Transmission Corporation, Commonwealth Edison Company, Illinois
Power Company, Invenergy Investment Company LLC, Magellan
Pipeline Company, L.P., Northern Illinois Gas Company, d/b/a Nicor
Gas, North Shore Gas Company, and the Peoples Gas Light and Coke
Company to file a brief amici curiae in support of taxpayer. We have
also permitted the Illinois Telecommunications Association to file a
brief amicus curiae in support of all respondents. For the reasons that
follow, we find that the rights and privileges to the reservoirs should
not be included in the assessment of taxpayer’s property, and affirm
the judgment of the appellate court.

                            BACKGROUND
    Taxpayer, a subsidiary of Kinder Morgan, a Kansas corporation,
owns a 75.976-acre parcel of land in Kankakee County (hereinafter,
the subject property) on which it operates a multibuilding control
center. The control center, known as Compressor Station 201,
facilitates the piping of gas to a cross-country pipeline 16 miles away
and the storage of natural gas in two underground storage facilities.
The underground storage facilities, known as “reservoirs,” are actually
two separate layers of porous rock lying 1,700 and 2,400 feet below

     1
        This term includes both the current owner, Natural Gas Pipeline
Company of America, and its predecessor, Natural Gas Storage Company
of Illinois, a Delaware corporation.

                                  -2-
the surface, respectively. These reservoirs2 lie below approximately
15,600 surface acres that surround and include the subject property.
Taxpayer owns the portion of the reservoirs that lies directly below
the subject property, but does not own any of the surrounding 15,600
acres or the reservoirs that lie below them.
     For storage purposes, natural gas is injected into the reservoirs
through a system of pipes that connect the pipeline to the compressor
station, and connect the compressor station with 281 wells that reach
down into the reservoirs at various surface points throughout the
15,600 acres. The injected gas displaces the water that naturally
occurs within the porous rock. The displaced water then creates a
natural “vessel” which keeps the gas from escaping laterally. The gas
is prevented from exiting to the surface by a layer of nonporous rock
that is likened to an upside-down soup bowl. The injection process is
reversed when gas is removed from the reservoirs. Taxpayer charges
its customers monthly reservation charges and tariffs based on gas
volume transported.
     In the early 1950s, before it acquired the subject property or began
construction of the compressor station, taxpayer secured voluntary
easements from the owners of the land that lay above and included the
reservoirs so that it could install and operate the wells and pipes used
in its storage system. The easements taxpayer acquired are similar for
each granting owner. An easement identified as “the Dickman
easement,” which was found to be representative by the PTAB, reads
in pertinent part: “This instrument made this [date] by record owner
[name of the fee landowner], herein referred to as Grantors, is in favor
of Natural Gas Storage Company of Illinois, a Delaware corporation,
herein referred to as Grantee.” The easements give taxpayer, as
grantee, “the exclusive right, privilege and easement to introduce
natural gas or other gases or vapors *** into the [reservoirs] *** to
store gas in said storage reservoir and retain the possession of gas so
stored as personal property, [and] to remove gas *** from the storage
reservoir.”

     2
      The reservoirs are part of a much larger underground geological
formation known as an aquifer. Any testimonial references to “the aquifer”
can be inferred to be references to the reservoirs at issue.

                                   -3-
    The easements also give taxpayer the right to drill wells, construct
and maintain those wells, lay pipes and electric lines on the grantees’
properties, and to enter onto the grantees’ properties to maintain the
wells and pipes. In return, taxpayer pays each landowner an annual
monetary sum. Taxpayer also agrees to pay the landowners for any
damage to crops, timber, or fences that its activities may cause, and
to provide grantees with free city water.
    In 1952, orders from the Illinois Commerce Commission (ICC)
and Federal Power Commission (FPC) gave taxpayer the exclusive
right to store gas in the reservoirs, to construct Compressor Station
201, to run approximately 16 miles of pipe from Compressor Station
201 to the cross-country pipeline, to dig the wells down to the
reservoirs, and to lay the pipe that connects the wells with
Compressor Station 201.3 Once the FPC and ICC orders were in
place, taxpayer purchased the subject property from Otto Kruse and
constructed Compressor Station 201. Operations began thereafter and
continue to this day.
    Petitioner assessed the subject property based on market values of
$17,160,849 for the tax year of 2000, and $32,000,000 for the tax
year of 2001. Market value is defined by the Uniform Standards of
Professional Appraisal Practice as “the most probable price which a
property should bring in a competitive and open market under all
conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected
by undue stimulus.”
    Taxpayer paid the taxes in full for each year, and then appealed
both the 2000 and 2001 assessments to the PTAB. These appeals
were consolidated. Before the PTAB, taxpayer submitted several
other appraisals of the subject property, all of which estimated its
market value at between $1,625,000 and $1,700,000. Kankakee
County officials, employees of taxpayer, and the drafters of all the

    3
     As the 1950s progressed, the FPC and ICC issued additional orders
allowing alterations and expansions to the original control center. In 1958,
taxpayer sought to expand its use of the aquifer to an even deeper layer of
porous rock, and filed supplemental applications with the ICC and FPC,
which were approved.

                                    -4-
appraisals appeared and testified at two hearings before the PTAB in
April 2002 and May 2003.
    At the 2002 hearing, Brad Baker, the assessor for the subject
property’s township, testified that he assessed the subject property for
the 2000 tax year based on a market value of $17,000,000. He
testified that this market value “was on the books, and it was just a
value that’s been carried on throughout the years.” Baker stated that
he did not know how any of the previous assessment values, or the
“cost ladders” detailing appreciation, were calculated.
    Sheila Donohoe, the chief county assessment officer for Kankakee
County, also testified. Donohoe testified that she had no record of any
complete appraisal of the subject property prior to the year 1999,
although adjustments to the valuation of the subject property had been
made throughout the years to account for the addition of new
buildings and structures. Donohoe stated that the county’s assessment
records for the subject property make no reference to the reservoirs,
nor attribute a value to them. Donahoe also testified that the county
does not assess pipelines.
    Steven Beatty, a member of the board of review, testified that
petitioner endorsed the $17,000,000 market value provided by Baker
for 2000 based on “testimony and research that was done and review
of information that was available at the hearings that we had, as well
as research that we did elsewhere.” Beatty also testified that petitioner
based its 2001 assessment on an appraisal of the subject property’s
market value prepared by Gary DeClark and Nancy Myers of Integra
Realty Resources of Chicago (Integra).
     Integra’s appraisal was entitled “A Converted Aquifer Natural
Gas Storage Facility of 101.4 BCF Capacity Beneath 75.976 Fee
Owned Acres at 5611 S. West Road And Inclusive of Subterranean
Easement Rights Beneath Some 15,600 Acres of Unowned Land.”
The “Special Limiting Conditions” section of the appraisal stated,
         “[T]he subject’s storage field actually lies below the surface of
         some 15,600 acres of land; meanwhile, that land area under
         fee ownership, according to available public records, is 75.976
         acres, a mere fraction of the total surface area over the storage
         field. Therefore, this analysis assumes that the rights to be
         considered include the subterranean easement rights for access

                                   -5-
         to and utilization of the storage field across the remaining
         15,600 + acres of land not owned in fee title by subject
         property ownership.”
     The assumption that the subject property is the beneficiary of
easement rights to the reservoirs was repeated and relied upon several
times throughout Integra’s appraisal. On cross-examination, DeClark
admitted that he did not read the gas storage easements before he
prepared his appraisal. He also admitted that, upon inspection, the
easements name taxpayer as the grantee, and not the subject property,
or any specific piece of property. When asked to indicate on a map
exactly where the parcels burdened by easements were, DeClark was
unable to do so. DeClark also admitted that portions of the reservoirs
extend into Iroquois County, and that his appraisal did not take that
fact into account.
     DeClark testified that he believed taxpayer’s easements, along
with the permits and certifications from the ICC and FPC, created a
“bundle of rights” that met the “unit rule” test of common ownership,
which is why he included them in the valuation. DeClark defined the
unit rule as “a rule in real estate valuation that requires the value of
the property in its entirety or its whole to be valued as an entity, rather
than the summation of the various parts to which it may have been
divided.” The unit rule should be applied, DeClark stated, if a
common use, common ownership, and contiguity are all present in the
property being appraised. DeClark explained that, in applying the unit
rule to the subject property, he looked at the relationship between the
reservoirs and the subject property and found a common use and
contiguity because “the entire entity of [taxpayer’s] facility, which
incorporates the buildings, the 75 acres and the subterranean easement
rights to use the aquifer for gas storage is the use.” DeClark stated
that the “common ownership” requirement of the unit rule was met
because taxpayer “owns the land in fee and also owns the buildings
thereon, but it also has a portion of the bundle of rights that ascribe to
it from the use of the [reservoirs.]” On cross-examination, DeClark
admitted that he did not mention the unit rule in his appraisal but
considered it “implicit in the valuation analysis that [he] conducted.”
     DeClark’s appraisal valued the subject property under three
different methods: the cost approach, the income approach, and the

                                   -6-
property tax valuation method. Under the cost approach, the appraisal
valued the replacement cost of the reservoirs, main buildings, ancillary
buildings, wellheads, tanks, fencing, and dikes, then detailed their
values given minus the appropriate depreciation and obsolescence
costs, and arrived at a cost approach market value of $30,000,000.
     For the income approach, DeClark’s appraisal used a discounted
cash flow analysis. DeClark stated that such an analysis “take[s] a
look at *** the anticipation of future benefits to get a present value
calculation or value conclusion.” In applying this analysis, the
appraisal noted that “the subject is a special use facility with an
income stream tied directly to the capacity of an underground storage
‘vessel.’ ” On cross-examination, DeClark admitted that he was
unable to acquire income data specific to the subject property, but that
he calculated a proportionate share of taxpayer’s total storage income
and assumed it to be applicable to the storage facility in question. The
appraisal did this by considering the storage facility’s “capacity,
location, and customer base as compared to [taxpayer’s] total gas
storage capacity and the locations of its other storage fields.” After
arriving at a net operating income, DeClark’s appraisal applied a
royalty percentage to the income stream based on his research of
landfills, which he deemed “similar in that they are land based as is this
underground storage vessel.” The appraisal then estimated market
value for the income approach at $32,590,000.
     On cross-examination, DeClark stated that, for the property tax
methodology, he used a system based on how taxation of depleted gas
fields occurs in Ohio. The Ohio method calls for the property owner
to pay a tax predicated upon the plant, buildings, and wells, as well as
the volume of gas in the reservoir. These values are then depreciated
accordingly to arrive at an assessed value. In applying this system to
the subject property, DeClark arrived at a value of $35,880,000. As
to the Ohio method, DeClark admitted on cross-examination that he
was not sure if depleted gas fields in Ohio were assessed and taxed as
real estate or personal property. DeClark also testified that he was
aware that the “property tax approach” is not currently applicable in
Illinois. According to DeClark, he implemented it in his appraisal as
a “check of reasonableness.”

                                   -7-
     The Integra appraisal then reconciled the values from the cost
approach, the income approach, and the property tax methodology,
and arrived at a market value of $32,000,000.
     In support of their appeal before the PTAB, respondent taxpayer
presented several appraisals of the subject property, all of which
estimated its market value at between $1,625,000 and $1,700,000.
Two of these appraisals were created by Howard B. Richter &
Associates, Inc., of Deerfield. The valuation dates for the Richter
appraisals were January 1, 2000, and January 1, 2001. The Richter
appraisals identified the subject property as “Natural Gas Pipeline
Company of America, Storage Facility.” Richter’s appraisals detailed
the characteristics of the subject property and all of its buildings, and
mentioned that the underground storage facility is “controlled through
easements with the neighboring farm owners” but did not attribute
those easements to the value of the property.
     Richter’s appraisals applied only the cost approach, and arrived at
an estimated value of $1,665,000 for 2001 and $1,625,000 for 2000.
A passage in one appraisal explained Richter’s reasoning for not using
the income approach. It stated, “No rental attributable to the real
estate alone can be ascertained and the basis of this approach is
negated.” When cross-examined about this statement, Richter replied,
“Any income generated by the ability to tap into this aquifer is
attributable to the business and exists only because of the off-site
business operations of this company”; and “[t]he market value of the
real estate in this case has virtually no relationship to the income
generated as a result of this property’s *** operations.” Richter then
likened the storage of gas to the storage of files in a warehouse. In
each business, he explained, the customer does not care where their
files or gas are stored, but only that the files or gas are transported
away from the business, stored safely, and returned or delivered when
the need arises. According to Richter, the location of the storage
facility is immaterial in each case and, therefore, the property itself
cannot be said to have contributed in any way to the income of the
business.
     Respondent taxpayer also submitted appraisals done by Robert
Herman and Michael Kelly of Real Estate Analysis Corporation.
Herman’s appraisals were dated January 1, 1999, and January 1, 2000.

                                  -8-
Kelly’s appraisal was dated January 1, 2001. Each document
appraised only the subject property and its improvements. Herman and
Kelly testified that, for their appraisals, they used only the cost
approach and the sales comparison approach. Kelly stated that he did
not utilize the income approach because taxpayer could conduct its
operations away from the subject property, including in Iroquois
County. Herman stated that he did not include the value of the
easements because they related to the going concern of the business,
and not to the subject property. Each appraiser testified that they were
aware that the entire facility was constructed to utilize the reservoirs,
and that easements and government permits were essential to the
creation of the facility. However, in their opinion, neither of these
factors added any value to the subject property. Both appraisers noted
that an analysis of the assessments of other parcels which sit atop the
reservoirs showed no added value as a result of their location.
Herman’s appraisal estimated the value of the subject property at
$1,650,000 for each year, and Kelly’s appraisal arrived at a figure of
$1,700,000.
    Floyd Hofstetter, the vice president of storage management for
taxpayer, then testified in depth about the history and current
operations of the compressor station and its connection to the pipeline
16 miles away. His testimony touched on such details as the
monitoring of the facility, managing the containment of the stored gas,
the make-up and installation of the well network, the geological
characteristics of the aquifer, the deliverability rate of the two
reservoirs, the cost estimates that should be accounted for in the
development of a gas storage field, and descriptions of the
compressor, gas processing equipment, and piping. Hofstetter
confirmed that Taxpayer had to obtain a certificate of convenience
from the Federal Energy Regulatory Commission (FERC) (the
successor to FPC) to operate the facility and that the rates taxpayer
charges for storage are regulated by FERC.
    Over petitioner’s objection, Patrick McFadden, a professor from
Loyola University-Chicago School of Law, testified about the
difference between easements appurtenant and easements in gross.
According to McFadden, easements appurtenant benefit a designated
property and “run with the land.” Conversely, easements in gross

                                  -9-
accrue not to property, but to an individual or entity. McFadden
testified that he had examined the Dickman easement, and determined
it to be an easement in gross which benefitted taxpayer.
     During the hearing, petitioner attempted to have the PTAB
compel the testimony of Donald Puckett. Petitioner referred to
Puckett as taxpayer’s district manager, but in actuality Puckett is the
operations manager of the plant on the subject property. Petitioner felt
that Puckett’s testimony was necessary because he was the “tour
guide” and source of some information for DeClark when DeClark
visited the facility during the course of his assessment. Petitioner’s
motion requesting that the PTAB subpoena Puckett was denied.
     At the conclusion of the hearings, the PTAB found that petitioner
erred in relying on the DeClark appraisal for its valuation of the
subject property. In its decision, the PTAB noted that petitioner failed
to provide any evidence that Illinois law authorizes application of the
“unit rule” to the subject property, or that it was appropriate to
include the reservoirs in the valuation of the subject property. The
PTAB noted that its decision was based on the fact that portions of
the reservoirs were in Iroquois County, that the subject easements did
not run with the subject property, that petitioner failed to establish any
sort of legal “nexus” between the government permits and the subject
property, and that DeClark’s appraisal contained several errors. The
PTAB also held that petitioner failed to adequately describe the
reservoirs it wished to be included in the valuation of the subject
property. The PTAB found that no weight could be given to
DeClark’s appraisal and instead deemed Kelly’s appraisal to be the
most appropriate. The PTAB concluded that the market value of the
subject property was $1,700,000.
      With one justice dissenting, the appellate court confirmed the
decision of the PTAB. The appellate court held that petitioner failed
to adequately describe the reservoirs it proposed to include in its
valuation, and failed to provide any authority to support its
contentions that the easements and government permits that accrued
to Taxpayer benefitted the subject property. No. 3–04–0016
(unpublished order under Supreme Court Rule 23). This appeal
followed.

                                  -10-
                              ANALYSIS
    Before this court, petitioner characterizes the main issue of this
case as the proper interpretation of section 1–130 of the Code, which
holds that taxable real estate includes “all rights and privileges
belonging or pertaining thereto.” 35 ILCS 200/1–130 (West 2004).
As this is an issue of statutory interpretation, petitioner contends de
novo review is proper. Petitioner also contends that the appropriate
property tax assessment methodology is at issue as well, and that this
too should be reviewed de novo.
     Respondents argue that this case involves a mixed question of law
and fact. Respondents admit that the PTAB was required not only to
construe the meaning of section 1–130 of the Code, which is a
question of law to be reviewed de novo. However, respondents claim
that the PTAB also had to make factual findings as to whether there
was some basis for each appraiser’s valuations. Respondents then
contend that the PTAB had to apply these facts to determine whether
the right to store gas in the reservoirs was a right attributable to the
subject property. According to respondents, this law-to-fact
application should be reviewed under the clearly erroneous standard.
    We initially note that we are not charged with the responsibility of
determining the market value of the subject property. Rather, the
central question before us is whether the PTAB’s decision to reduce
petitioner’s tax assessments for the 2000 and 2001 tax years was
correct. The determination turns on whether petitioner employed a
proper valuation method in assessing the subject property. More
particularly, it turns on whether the easements, governmental permits,
and rights to utilize the reservoirs for gas storage should be
considered “rights and privileges belonging or pertaining to” the
subject property. Accordingly, our first determination is one of
statutory construction, which is reviewed de novo. Fisher v. Waldrop,
221 Ill. 2d 102, 112 (2006). Following that, we must determine
whether the PTAB considered appraisals that utilized the proper
methodology for the valuation of the subject property. This, too, is a
legal question to be reviewed de novo. Kankakee County Board of
Review v. Property Tax Appeal Board, 131 Ill. 2d 1, 14 (1989). See
also United Airlines, Inc. v. Pappas, 348 Ill. App. 3d 563, 569 (2004)
(“This appeal requires us to examine the appropriateness of the

                                 -11-
valuation methodology used by taxpayer’s expert in valuing the
leasehold interest to support its objection to the leasehold’s assessed
value. *** Therefore, our standard of review relating to the question
of law at issue in this appeal is de novo)”; Board of Review v.
Property Tax Appeal Board, 304 Ill. App. 3d 535, 538 (1999)
(“Where the propriety of the method of valuation is challenged ***
the issue is one of law”).

                      I. “Belonging or Pertaining”
     Section 1–130 of the Code defines taxable property as “[t]he land
itself, with all things contained therein, and also all buildings,
structures and improvements, and other permanent fixtures thereon,
*** and all rights and privileges belonging or pertaining thereto,
except where otherwise specified by this Code.” 35 ILCS 200/1–130
(West 2004). Petitioner contends that, by choosing to include the
words “belonging or pertaining” in the definition, the General
Assembly intended another property right short of fee simple
ownership.
     In construing a statute, we must give effect to the intention of the
legislature “so that each word, clause, or sentence is given reasonable
meaning and not deemed superfluous or void.” Quad Cities Open,
Inc. v. City of Silvis, 208 Ill. 2d 498, 508 (2004). A tax statute must
be strictly construed against the government and in favor of the
taxpayer. Van’s Material Co. v. Department of Revenue, 131 Ill. 2d
196, 202 (1989); Gem Electronics of Monmouth, Inc. v. Department
of Revenue, 183 Ill. 2d 470, 475 (1998).
     “ ‘The primary meaning, and also the common and ordinary
meaning, of the word “belong,” is to be the property of.’ ” In re
Estate of Ostrowski, 3 Ill. App. 2d 431, 435 (1954). See also Black’s
Law Dictionary 164 (8th ed. 2004) (defining “belong” as “[t]o be the
property of a person or thing”). Petitioner maintains that, if
“belonging” connotes ownership of rights or privileges, the disjunctive
reference to “pertaining”in section 1–130 of the Code must indicate
something different and broader than mere ownership of said rights
and privileges. “Pertain” is defined as “[t]o relate to; to concern.”
Black’s Law Dictionary 1181 (8th ed. 2004).

                                  -12-
    There is no dispute by either party that the reservoirs at issue
belong, proportionately, to those who own the surface land directly
above them. See Jilek v. Chicago, Wilmington & Franklin Coal Co.,
382 Ill. 241, 248 (1943) (“The owner in fee owns to the center of the
earth”). Petitioner argues, however, that the easements and
governmental permits that allow taxpayer to utilize the portions of the
reservoirs not under the subject property make up a “bundle of rights”
that “pertains” to the subject property, thus enhancing its value
beyond that of the neighboring industrial or farming property.
    According to respondents, all of petitioners’ arguments contain
the same fundamental flaw: incorrectly assuming that the gas storage
rights that taxpayer obtained and exercised benefitted the subject
property, and not taxpayer’s business. We agree with respondents and
find that, while “pertain,” for purposes of section 1–130 of the Code,
might imply a less rigid connection than “belong,” there still must be
some direct relationship between the rights and the property at issue.
For the following reasons, we find that petitioner has not established
such a relationship.

                              A. Easements
    The first components of the “bundle of rights” which petitioner
contends pertain to the subject property are the easements that allow
taxpayer to operate its pipes and wells on the 15,600 acres of property
owned by others that surrounds Compressor Station 201. Petitioner
concedes that these easements are easements in gross that name
taxpayer, and not the subject property, as their beneficiary, but
maintains that the classification of the easements is irrelevant because
the easements “provide only part of the basis for Taxpayer’s exclusive
storage rights.” Petitioner argues that, because the easements are only
part of the “bundle of rights,” their classification is not determinative.
Further, according to petitioner, there is no legal authority to support
the contention that easements in gross may not be considered as
“rights and privileges” of a particular property.
    An easement appurtenant is “created to benefit another tract of
land, the use of easement being incident to the ownership of that other
tract.” Black’s Law Dictionary 549 (8th ed. 2004). An easement
appurtenant runs with the land and may be transferred. Traylor v.

                                  -13-
Parkinson, 355 Ill. 476, 479 (1934). An easement in gross is defined
as “[a]n easement benefiting a particular person and not a particular
piece of land.” Black’s Law Dictionary 549 (8th ed. 2004). See also
Traylor, 355 Ill. at 479 (easement in gross is personal and
nontransferable).
    The Dickman easement, found to be representative, reads, “This
instrument made this [date] by record owner [name of the fee
landowner], herein referred to as Grantors, is in favor of Natural Gas
Storage Company of Illinois, a Delaware corporation, herein referred
to as Grantee.” Such wording clearly indicates that these easements
are in gross, and benefit taxpayer rather than the subject property, as
petitioner concedes.
    We find, contrary to petitioner’s unsupported argument, that the
classification of the easements in question is relevant here. Were the
easements at issue here appurtenant, naming the subject property as
the beneficiary of the right to place wells and pipes on the land of
others, then such right would be attributed to the subject property and
assessable by petitioner. The easements in question, however, are
easements in gross, benefitting taxpayer, and not the subject property.
Petitioner’s contention that the legal effect of the easements is
somehow negated by the fact that they are part of a “bundle of rights”
has no support in logic or the law. Accordingly, we find that the
easements in question do not pertain to the subject property.

                        B. ICC and FPC Permits
    Petitioner next argues that certain passages in the orders of the
ICC and FPC, as well as taxpayer’s correspondence with those
agencies, serve as evidence that the rights and privileges to the
reservoirs that accrued to the taxpayer pertain to the subject property.
Petitioner initially notes that the September 1952 order of the FPC,
which granted taxpayer the right to construct Compressor Station 201
and utilize the reservoirs, includes the words “storage rights in
approximately 15,000 acres *** together with all necessary and
appropriate consents, permits, contracts, easements, rights-of-way,
and other interests in property pertaining to or used in connection with
the storage project.” Petitioner notes that the FPC used the term
“pertaining,” which is the statutory term at issue here. Petitioner

                                 -14-
argues that the PTAB incorrectly concluded that the method of
assessing the subject property may not take account of these
“pertaining” underground storage rights.
    Petitioner also details the history of the creation of Compressor
Station 201 and the use of the reservoirs, concluding that the history
of regulatory approvals leading to the development of the gas storage
project shows that the reservoirs were “intended to be operated as a
single facility which would necessarily be managed and controlled”
from one control center, wherever constructed. In support of its
contention, petitioner cites two 1952 orders from the ICC and FPC,
each granting taxpayer the right to “acquire ownership in fee simple
or by other estate of parcels of real estate within or adjacent to the
storage area necessary for the erection of compression plants,
dehydration plants, and any structures appurtenant thereto, [and] lay
gathering lines to connect them to the centrally located compressor
station and dehydration plant.” Petitioner also relies on a 1959
supplemental order from the ICC as well as a 1959 legal notice that
ran in the Kankakee Daily Journal. These provide that taxpayer “owns
and operates (under authority of certificates of public convenience and
necessity issued to it by the FPC) an aquifer-type underground storage
reservoir near Herscher.”
    Petitioner asserts that these passages from the recorded history of
regulatory approval leading up to the development of the gas storage
operation show plainly that the reservoirs were intended to be
operated in union with a compressor station located in their vicinity.
Petitioner contends that, since Compressor Station 201 is located on
the subject property, the subject property cannot then be separated
from the reservoirs for valuation purposes.
    Illinois case law is consistent in holding that government permits,
ordinances, licenses, orders, or regulatory approvals do not create
assessable entities. See, e.g., Boland v. Walters, 346 Ill. 184, 188
(1931) (a license in respect to real property is merely a privilege to do
certain things on land without being an estate itself); Dimucci Home
Builders, Inc. v. Metropolitan Life Insurance Co., 312 Ill. App. 3d
779, 782 (2000) (permits are not conveyances of title); Pasquinelli v.
Village of Mundelein, 257 Ill. App. 3d 1057, 1062-63, 1065 (1994)

                                  -15-
(permits and village board approvals to operate a sewer line are not
indicia of ownership).
     Central Illinois Public Service Co. v. Swartz, 284 Ill. 108 (1918),
is instructive. In Swartz, the plaintiff was granted, by ordinance, the
right to construct and maintain an electric plant as well as electric
poles and wires in the town of Bushnell. Swartz, 284 Ill. at 110. When
the property of the plaintiff was assessed for taxation, the assessor
included the “franchise, got through an ordinance of the city of
Bushnell, to operate a plant in the city.” Swartz, 284 Ill. at 110. The
Swartz court rejected the assessment of the franchise as tangible
property. Swartz, 284 Ill. at 112. Specifically, it stated,
         “This permission or license exists independently of the poles,
         wire, apparatus, machinery or other means whereby it may be
         available. It attaches not to the tangible property of the
         corporation but to the franchise, and would remain and be
         available to the corporation if all its tangible property were
         destroyed.” Swartz, 284 Ill. at 112.
     In the instant case, all of the ICC and FPC orders attached to
taxpayer, and not to the subject property. Just as in Swartz, should the
taxpayer choose to leave the subject property, or suffer any
destruction of its tangible property, the orders would remain in place,
continuing to benefit taxpayer regardless of where its property was
located. See also Quantum Pipeline Co. v. Illinois Commerce
Comm’n, 304 Ill. App. 3d 310, 315-17 (1999) (permit issued by the
ICC grants only a business right, not one of property). Accordingly,
we find that the ICC and FPC orders did not, as petitioner alleges,
create an indivisible union between the subject property and the
reservoirs. Rather, the rights to the reservoirs accrue to taxpayer, and
do not pertain to the subject property.
     We note that petitioner attempts to draw an analogy between
governmental orders such as those at issue in the instant case and
property zoning. Petitioner argues that, just as zoning changes can
affect the use of property and therefore its value, the rights to use the
reservoir, which arise from easements and governmental rulings which
have transpired over 50 years, enhance the value of the subject
property. We find no merit in this argument.

                                  -16-
    Zoning regulations apply to particular properties and not their
owners. See Lake Forest Chateau, Inc. v. City of Lake Forest, 133 Ill.
2d 129, 131 (1989) (zoning ordinances apply to property). As noted,
the government orders at issue here accrue to taxpayer and not the
subject property. Accordingly, petitioner’s analogy to zoning is
unpersuasive.
    In light of our holdings above regarding easements and
government permits, we find that the rights and privileges taxpayer
enjoys to the reservoirs neither belong nor pertain to the subject
property for purposes of section 1–130 of the Code.

                                II. Location
     Petitioner next contends that regardless of whether the “rights and
privileges” to the reservoirs are tied to it through any recorded basis
or legal title, the subject parcel’s proximity to the reservoirs enhances
its value. Petitioner argues that Illinois courts routinely acknowledge
that property value may increase or decrease due to elements that lay
beyond the boundaries of the property. In support of its argument
petitioner points to cases such as Lake County Board of Review v.
Property Tax Appeal Board, 91 Ill. App. 3d 117, 122 (1980)
(“property adjoining or in close proximity to a body of water, a park,
golf course or other scenic view may well have an increased value
because of its location”), O’Brien v. City of O’Fallon, 80 Ill. App. 3d
841 (1980) (value of house on lake impaired when sewage discharged
into lake), and Illinois Light & Power Co. v. Bedard, 343 Ill. 618
(1931) (it is common knowledge that land located near a body of
water is worth more than land located elsewhere).
     Petitioner then cites Board of Education of Township High School
District 205 v. Property Tax Appeal Board, 142 Ill. App. 3d 853
(1986), as an example of how location alone can enhance a property’s
value. In Board of Education, the property to be valued was a
hydroelectric power plant. Board of Education, 142 Ill. App. 3d at
854-55. The Board of Education court held that the PTAB properly
valued the plant by using the income approach applied to the power-
generating capacity and potential income of the plant. Board of
Education, 142 Ill. App. 3d at 857. Petitioner asserts that in both
Board of Education and the instant case, the property at issue houses

                                  -17-
a “control center” type facility that utilizes a resource not found within
the boundaries of that property. Petitioner maintains that the
hydroelectric power plant in Board of Education, which takes its
power from the river that begins and ends outside the boundaries of
the property, is directly analogous to Compressor Station 201 here,
which is used to access the natural gas stored in the reservoirs that lay
mostly outside the subject property.
     We do not dispute petitioner’s argument that amenities or
resources situated beyond a property’s boundaries can increase its
value. The difference between the properties in the cases petitioner
relies on and the subject property, however, is one of market value.
There is and will always be a market for properties with access to
water, golf courses, and countless other features that hold value to
prospective purchasers. There is no similar market for the subject
property. Any purchaser who might acquire the subject property
would not be able to utilize the reservoirs. This is because taxpayer,
and not the subject property, holds exclusive rights, obtained through
easements and government orders, to use the reservoirs. Thus, the
right and privilege of being close to the reservoirs is not a marketable
asset, and the market value of the subject property is not enhanced
beyond that of other industrial or farming properties in the area.
     Moreover, Board of Education does not support petitioner’s
contention. In Board of Education, the income approach to valuation
was proper because the plant generated income due solely to its
proximity to the river. The ability of a hydroelectric plant to generate
income is directly tied to its location. A plant in a location away from
the river would not be able to generate the same income. In the instant
case, there is no similar need for the compressor station to be located
on the subject property. Testimony has established that the
compressor station could have been located anywhere in the area,
even 16 miles away from the reservoirs along the main pipeline. In
contrast to the hydroelectric plant, which derived its entire income
value from its location on a river, the location of the compressor
station, whether above the reservoirs or otherwise, has no real impact
on the income it produces. Therefore, we find Board of Education to
be inapplicable to the instant case.

                                  -18-
    Petitioner makes the argument that changes to the control center
are forbidden without approval from FERC and the ICC, and that
moving a gas storage control center with all its related equipment and
connecting entities cannot be readily accomplished. This argument is
misplaced. The issue is not whether Compressor Station 201 can be
moved, but rather whether its income is derived from its location.
Petitioner next contends that even if the compressor station were
moved, the taxable character of the rights and privileges related to the
reservoirs would not change, but would move with the compressor
station. But this argument actually supports respondents’ contention
that the rights and privileges to the reservoirs do not pertain to the
subject property. Accordingly, we find that the PTAB did not err
when it relied on market value appraisals which did not attribute
added value to the subject property due to its proximity to the
reservoirs.

            III. “A Broad Concept of Rights and Privileges”
     Petitioner relies on People ex rel. City of Chicago v. Upham, 221
Ill. 555 (1906), as an example of this court interpreting the statutory
definition of real property now found in section 1–130 of the Code
and applying a “broad concept of rights and privileges.” Petitioner
contends that Upham provides sufficient authority to consider the
rights and privileges of the reservoirs in the assessment of the subject
property.
     In Upham, the respondent telephone and telegraph companies, by
virtue of city ordinances, constructed cement tunnels beneath Chicago
city streets to facilitate their businesses. Upham, 221 Ill. at 558. The
ordinances authorized the corporations to maintain the tunnels for 30
years, at which time the tunnels could become the property of the city.
Upham, 221 Ill. at 558. The petitioner contended that the tunnels
were taxable assets that it should assess. Upham, 221 Ill. at 559. The
respondent conceded that the tunnels were subject to assessment for
taxation, but contended that since they were constructed below public
streets, the taxable interest was one of intangible use, and not one of
real property to be assessed by local assessors. Upham, 221 Ill. at
559.

                                 -19-
     The Upham court found that “while it is true the title to the streets
of Chicago is in the city, the [corporations], by virtue of said
ordinances, clearly have ‘rights and privileges’ belonging and
pertaining to the soil in which the tunnels are constructed, separate
and apart from the fee of the streets, which rests in the city.” Upham,
221 Ill. at 560. The Upham court held that the tunnels had an
existence separate from the city streets above and were real property
in the same way that a bridge or a pier has a separate existence from
the land upon which it is constructed. Upham, 221 Ill. at 560. The fact
that the tunnels were situated below city streets not subject to
assessment for taxation had no bearing on this court’s determination
that the tunnels were real property. Upham, 221 Ill. at 561. See also
People ex rel. New York & Harlem R.R. Co. v. Commissioners of
Taxes & Assessments, 101 N.Y. 322, 326, 4 N.E. 127, 128 (1886)
(tunnels under city streets should be treated and assessed as real
property).
      We find Upham distinguishable and insufficient authority to
support a finding that the rights and privileges taxpayer enjoys to the
reservoirs are assessable to the subject property. The issue in Upham
was whether the underground tunnels were real property or an
intangible right. Upham, 221 Ill. at 560. There is no disagreement in
the instant case as to whether the reservoirs are real property or
whether they have an existence separate from the land under which
they lay. The issue here is whether respondents’ rights to utilize the
reservoirs pertain to and should be assessed to the subject property.
Upham provides no guidance on this issue.
     Further, there is a fundamental difference between the man-made
tunnels in Upham and the naturally occurring reservoirs in the instant
case. Piers, bridges, and underground tunnels “create” new property
where none existed before, in spaces that were heretofore
nonassessable. Piers extend into water, bridges soar into air, and
tunnels create space below the surface of land. Upham holds that such
man-made creations have a “separate existence from the land in which
they are constructed,” and are assessable real property belonging to
their constructors. Upham, 221 Ill. at 560. This differs greatly from
the reservoirs at issue here, which are natural formations already
owned by those who own the surface land above them. As such, we

                                  -20-
find that Upham has no bearing on the issues of the instant case and
does not support petitioner’s argument that taxpayer’s right to utilize
the reservoirs should be assessed to the subject property.

                         IV. Evidentiary Errors
     Petitioner lastly argues that the PTAB committed evidentiary
errors requiring reversal when it refused to require the appearance of
Puckett at a hearing and allowed McFadden to testify about the
difference between easements appurtenant and easements in gross.
Petitioner argues that Puckett’s testimony was essential because
Puckett was DeClark’s “primary tour guide” and that some of the
information relied upon by DeClark in performing his analysis was
provided by Puckett. In regard to McFadden, petitioner contends that
his testimony amounted to legal conclusions, which are not properly
admitted.
     “Absent some indication that a restriction on evidence has a
prejudicial impact upon an administrative proceeding, any error in that
regard does not rise to the level of reversible error.” Kankakee County
Board of Review v. Property Tax Appeal Board, 337 Ill. App. 3d
1070, 1076 (2003). After carefully reviewing the record, we agree
with the PTAB and the appellate court that petitioner has not
demonstrated how it was prejudiced by Puckett’s absence. The
testimony of Floyd Hofstetter provided ample information about the
operation of the compressor station and the utilization of the
reservoirs. As to McFadden’s testimony, which was about the
differences between easements appurtenant and easements in gross,
we note that petitioner concedes that the easements here are in gross.
Accordingly, after reviewing the record, we do not find his appearance
at the hearing constitutes reversible error.

                            CONCLUSION
    In light of our holdings above, we find that the decision of the
PTAB to disregard Integra’s appraisal, which attributed the rights and
privileges of the reservoirs to the subject property, was correct. We
need not address petitioner’s contention that the PTAB erred in
finding that petitioner failed to adequately describe the reservoirs it

                                 -21-
wished to be included in the valuation of the subject property. We find
that, because neither the reservoirs, nor the rights to utilize them, can
be attributed to the subject property, their description is irrelevant. For
the foregoing reasons, the judgment of the appellate court is affirmed.

                                   Appellate court judgment affirmed.

   JUSTICE FREEMAN took no part in the consideration or
decision of this case.

                                   -22-