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Real Property – Riparian Rights – Inverse Condemnation

L & S Water Power, Inc. v. Piedmont Triad Regional Water Authority. (Lawyers Weekly No. 11-07-0405, 19 pp.) (J. Douglas McCullough, J.) Appealed from Guilford County Superior Court. (Calvin E. Murphy, J.) N.C. App.

Holding: Hydroelectric power plants were entitled to compensation for loss of their riparian rights since their ability to produce electricity was negatively affected by reduction of the natural stream flow of the Deep River by the defendant-water authority.

We affirm the order of the trial court.

Background

Defendant is a public water authority that is comprised of Randolph County and the municipalities of Greensboro, High Point, Jamestown, Archdale and Randleman. Defendant was organized under G.S. § 162A-3.1 to develop a public water supply for the Piedmont Triad region of North Carolina to satisfy its projected water demand for the next 50 years or more.

Plaintiffs are downstream riparian owners who operate hydroelectric power plants on the Deep River.

On Aug. 18, 1988, defendant petitioned the N.C. Environmental Management Commission, pursuant to G.S. §§ 162A-7 and 153A-285 (both repealed), to use the power of eminent domain to divert water from the Deep River basin to construct Randleman Lake. On Feb. 21, 1992, the EMC issued a certificate authorizing defendant to acquire land by eminent domain and divert by interbasin transfer up to 30.5 million gallons of water per day from the Deep River Basin to the Haw and Yadkin River Basins.

In the EMC Certificate, the EMC found that the minimum average 7Q10 flow in the Deep River at the Randleman Lake impoundment is slightly less than 10 cubic feet per second.

In April 2001, defendant received a 404 Permit from the Department of the Army authorizing it to construct the Randleman Dam. Defendant built the Randleman Dam and started filling the Randleman Lake in order to develop a public water supply.

On May 29, 2008, plaintiffs sued defendant for inverse condemnation and asserted that defendant decreased the rate of water flow in the Deep River and sought compensation from defendant for the taking of their riparian rights.

On Oct. 26, 2009, the trial court held that defendant had taken plaintiffs’ riparian rights and that plaintiffs were entitled to compensation from defendant. The trial court concluded that plaintiffs are entitled to be compensated for the loss of stream flow and that plaintiffs’ riparian rights can be valued by the loss of electricity capable of being produced as a result of reduction of stream flow. This appeal followed.

Discussion

Defendant claims that plaintiffs do not have a sufficiently defined interest in the rate of water flow in the Deep River. We disagree.

Defendant is a public authority that possesses the power of eminent domain. Defendant argues that, pursuant to Dunlap v. Light Co., 212 N.C. 814, 195 S.E. 43 (1938), plaintiffs do not have a property interest in the natural flow of water and that a reduction in water flow is not a compensable taking.

In Dunlap, a private landowner sought compensation from the power company for its exercise of eminent domain over waters of the Yadkin River. In that case, the power company closed the flood gates of the dam at night, decreasing the amount of water in the stream’s channel, and opened those gates in the morning, which accelerated the flow of water.

The Supreme Court upheld the judgment of nonsuit for plaintiff’s cause of action for taking his riparian rights. However, Dunlap does not stand for the proposition that a reduction of flow is not compensable.

The Supreme Court affirmed the judgment of nonsuit because the plaintiff in Dunlap was unable to show that the defendant’s actions caused a permanent disturbance of the natural water flow.

Plaintiffs’ cause of action in the present case is not analogous to Dunlap, as plaintiffs were able to present evidence at trial that defendant’s diversion of water has reduced and will continue to reduce the natural rate of flow in the Deep River.

Affirmed.


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