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Terrene contends that the FMV on November 15, 1998 was
$1,801,618. Terrene first argues that no comparable sales exist,
so we must use only the DCF method. Terrene also argues--
crucially as it turns out--that the type of interest to which we
should be applying that method is a royalty interest, not an
operating interest. Terrene’s expert, Gerald Ebanks, began with
the field logs and samples that were part of a Geotest report
that wasn’t contested by either party. Based on these soil
borings, Ebanks created an isopach map3 of the aggregate across
the property. He then subtracted a 25-foot nonminable setback
next to Hamblen Road, multiplied the remainder by 12% to reflect
the increase in the volume of sand and gravel once they’re
brought to the surface, and finally determined that the total
minable deposits were 3,973,149 tons. He estimated that a
prudent slope of the pit walls and the usual operations of a mine
would reduce the total tons of minable aggregate to 3,637,000.
Unlike Moritz, Ebanks did not include a work area in his
calculation because he assumed that the operator would build a
workplant somewhere on the 24-acre parcel still owned by Terrene
that was sand-and-gravel-free. Ebanks’s hypothetical mine
operator would produce at a much higher rate than Moritz’s--
3 An isopach map depicts the thickness of deposits (in this
case, sand and gravel deposits) as contour lines, called
isopachs. Think of it as a topographic map, except that the
contour lines are subterranean. Ebanks’s isopach map assumes
that changes in the thickness of sand and gravel deposits between
boreholes are linear.
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Last modified: November 10, 2007