Central Valley Gas Storage, LLC v. Southam
11 Cal. App. 5th 686
| Cal. Ct. App. | 2017Background
- Central Valley Gas Storage LLC operates a 677-acre underground gas storage project in Colusa County; Southam owns 80 acres within the project boundary and refused to lease, prompting condemnation proceedings.
- Central Valley sought just compensation for taking storage rights; jury awarded Southam $400/acre/year (minimum) for 80 acres plus an overage share (11.82% of 4% of AGI) based on surface-acre valuation testimony.
- Central Valley moved in limine to exclude any valuation based on underground reservoir volume, submitting a declaration from its expert explaining California market practice values storage leases by surface acreage (including buffer zones) and not subterranean volume.
- Southam argued a volume-based valuation (claiming his land held ~43% of storage sands) and relied on Pacific Gas & Electric Co. v. Zuckerman, which allowed non-market valuation methods where no market existed.
- The trial court excluded volume-based evidence absent comparable transactions using volume; the jury relied on surface-acre valuation and returned the award.
- On appeal, the Third District affirmed, holding a developed market now exists that values storage rights by surface acres, so volume-based valuation was properly excluded and many of Southam’s additional claims were forfeited for inadequate briefing.
Issues
| Issue | Southam's Argument | Central Valley's Argument | Held |
|---|---|---|---|
| Should case be remanded so Central Valley computes underground storage volume under Southam's land? | Remand to calculate Southam's aliquot share of reservoir volume. | Volume is irrelevant because market-valued leases use surface acres; no need to compute volume. | No remand; trial court correctly excluded volume metric and market used surface acres. |
| Does Zuckerman preclude use of surface acres as valuation metric? | Zuckerman (1987) bars using surface acres; valuation must allow volume-based methods. | Zuckerman applied where no market existed; current California market values by surface acres. | Rejected; court factually distinguished Zuckerman because a market has since developed. |
| Was Central Valley’s in limine motion procedurally defective for relying on an expert declaration without prior cross-examination? | Motion was infirm because expert declaration was not cross-examined beforehand. | Expert declarations may support pretrial motions; Southam had opportunity and did cross-examine at trial. | Rejected; no entitlement to pre-motion cross-examination and Southam cross-examined at trial. |
| Should Southam’s volume-based testimony (himself and expert Bertholf) have been admitted? | Testimony would show large share of reservoir volume under his land, supporting volume-based compensation. | No comparable market transactions value by volume; testimony unreliable and excluded under trial court order. | Forfeited largely for inadequate briefing; in any event trial court properly excluded volume-based valuation absent market comparables. |
Key Cases Cited
- Pacific Gas & Electric Co. v. Zuckerman, 189 Cal.App.3d 1113 (discusses valuation when no market exists and permits equitable approaches)
- Auto Equity Sales v. Superior Court, 57 Cal.2d 450 (decisions of California Supreme Court bind lower courts; Court of Appeal not rigidly bound to its prior panels)
- County of San Diego v. Rancho Vista Del Mar, Inc., 16 Cal.App.4th 1046 (when a private market exists, valuation must account for market evidence)
- Fost v. Superior Court, 80 Cal.App.4th 724 (witness cross-examination occurs at trial)
- United States v. Miller, 317 U.S. 369 (constitutional just compensation principles invoked by Southam on Fifth Amendment grounds)