STEPHENS PRODUCTION COMPANY v. LARSEN
2017 OK 36
| Okla. | 2017Background
- Stephens Production sought condemnation under Oklahoma’s Underground Storage of Gas statutes to create an underground natural gas storage facility in the Hunton Formation beneath ~900 acres in Haskell County.
- The Oklahoma Corporation Commission approved the project in 2009, finding the reservoir suitable and in the public interest; that order was not appealed.
- Royce Larsen owns an 80‑acre parcel overlying ~68.4 reservoir acres (≈14.87% of the reservoir); the taking was an underground storage easement plus a surface easement that would not place wells or facilities on Larsen’s land.
- Commissioners valued Larsen’s interest at $12,400; Stephens offered compensation previously and nearly all other landowners settled; Larsen proceeded to trial, where his expert valued the taking at ≈$419,000 and Stephens’ expert at $9,000.
- The trial court (bench) awarded $9,000. The Court of Civil Appeals affirmed; the Oklahoma Supreme Court granted certiorari and affirmed the trial court’s valuation.
Issues
| Issue | Plaintiff's Argument (Stephens) | Defendant's Argument (Larsen) | Held |
|---|---|---|---|
| 1. Proper measure of just compensation for an underground storage easement | Market value should reflect highest and best use of completed storage facility; comparable storage leases support high valuation | Value should be measured at time of taking; speculative project completion and need to combine interests cannot be used absent reasonable probability | Court held speculative, post‑taking combination/value cannot be used absent evidence of reasonable probability; use is measured at time of taking and must be reasonably probable |
| 2. Whether individual reservoir owner can claim enhanced value from reservoir use without combination | Project developer’s market evidence and storage‑lease comparables show market for storage rights | Larsen argued his pro rata share of completed facility has substantial value | Court held an individual owner cannot realize value from a storage reservoir that requires combination of multiple tracts unless there is evidence of reasonable probability of combination or market demand |
| 3. Burden to prove reasonable probability of combination / market demand | Developer relied on approvals and existing negotiated easements as evidence of project feasibility | Larsen failed to show prior market demand or attempts to combine; his expert produced no proof of combination probability | Court placed burden on landowner (after taking proved) to show probability of combination; Larsen failed to meet it |
| 4. Admissibility/weight of expert appraisals and standard of review | Stephens’ appraisal used sales comparison and storage‑impact study; trial court may weigh expert credibility | Larsen’s expert used pro forma capitalization of a completed 900‑acre facility | Court deferred to trial court’s credibility determinations and affirmed $9,000 where competent evidence supported the award |
Key Cases Cited
- Eichman v. Oklahoma City, 202 P. 184 (Okla. 1921) (condemned owner cannot recover increased value based on a special use requiring union of multiple parcels absent reasonable probability of combination)
- Olson v. United States, 292 U.S. 246 (U.S. 1934) (physical adaptability alone does not affect market value unless reasonable probability of combination or acquisition exists)
- State ex rel. Dep’t of Transp. v. Lamar Advertising of Okla., 335 P.3d 771 (Okla. 2014) (condemnation valuation principles; burden shifts to landowner to prove fair market value once taking established)
- Mueggenborg v. Walling, 836 P.2d 112 (Okla. 1992) (trial court best positioned to assess witness credibility in non‑jury trials)
- Arkansas Louisiana Gas Co. v. Latham, 650 P.2d 49 (Okla. 1982) (landowners entitled to just compensation under underground storage statutes)
- Del City v. Haynes, 483 P.2d 1152 (Okla. 1971) (adaptability to special use may be considered when reasonably probable)
- McAlester Urban Renewal Auth. v. Lorince, 499 P.2d 925 (Okla. 1972) (uncertain special uses must be shown to be within reasonable probability to affect valuation)