Valuation of minerals in takings cases

It is well settled that when the government uses the power of eminent domain to take private property for a public purpose, the government is required to pay the private land owner just compensation. Just compensation is the fair market value of the property. This is a difficult determination when the property does not contain unexplored mineral deposits; it is an especially difficult determination if the property does. When attempting to place a value on an unexplored mineral deposit, appraisers turn to three main methods: (1) the comparable sales approach, (2) the cost approach, and (3) the income capitalization approach. All of these methods have their pros and cons. This article explores each method and discusses the strengths and weaknesses of each. After each method is discussed, it is applied to an actual situation in Montana and discussed in that context. The final discussion includes an analysis of which method would work best in that situation and why.