United States v. Virginia Electric & Power Co.

Background

A federal project to build a dam led the government to take a flowage easement over 1,840 acres next to a navigable river. A power company owned a perpetual, exclusive easement to flood 1,540 of those acres, acquired from the landowner. The landowner separately agreed to sell part of the tract to the government for one dollar, subject to existing rights, and the power company intervened to contest the amount of compensation. Commissioners later awarded $65,520 to the power company, and the Supreme Court reviewed whether the easement had compensable value.

Reasoning

The Court held that a flowage easement is property and that the federal navigational servitude does not automatically eliminate compensation for fast lands above the ordinary high-water mark. The Court required excluding any water-power value tied to the river’s flow, but it said the easement could still have separate value tied to nonriparian uses like agriculture, timber, or grazing because the easement carried a transferable right to destroy those uses. The correct valuation measures the owner’s loss, not the government’s gain. The Court found the lower court erred in apportioning the award and vacated the judgment, remanding for a new valuation that discounts nonriparian value by the probability the easement would have been exercised.

Real world impact

The decision makes clear that owners of flowage easements can be paid for non-waterpower losses when fast lands are flooded in federal projects. Valuations must exclude hydroelectric value and assess the likelihood the easement would have been used, without giving weight to the government’s special need. The ruling remands the case for recalculation and does not represent a final, permanent award.

Dissents or concurrances

A dissent argued the easement had no value because its use depended on a federal license to dam the river that was never issued, so the government owed nothing; a concurrence emphasized the legal distinction between riverbed lands and fast lands above the high-water mark.