Way too much common sense here...pay what you say it was worth when you levied taxes on it. Way too simple. Better get lawyers to screw it up...I mean help.
I usually don't disagree with Chris, but I will here. Actual value (at least in CA with prop13) is not always appraised value, especially with big market fluctuations. I'll use my condo as an example. I bought it in 1997 for $135K. In 2005, neighbors sold similar units for a tad over $500K. By 2010, I would be lucky to get $300K for it. With current rising values, if I put it on the market tomorrow morning for $425K, it would be gone by lunch in a bidding war.
My property tax statement shows the appraised value at $179K. That's what the government considers my "fair market value". I would be an idiot to sell it to them for that. Given, I live in a really hot housing market, and many places in the Central Valley are not. But most of that land is going to be worth much more than anyone who bought it 20 years ago paid, and again, high quality farmland is going for a premium. If I had a piece of undeveloped, alkaline laden land with no water, I might sell to the state at appraised value in a heartbeat. If I have production land with good groundwater that private parties are waving cash in my face to sell at $20K/acre, why would I sell to the state at an appraised value that might be equivalent to $10K/acre? Or why should I be forced to?
Additionally, CA has the Williamson Act, which greatly reduces taxes on land that is dedicated to farming. The landowner is not allowed to subdivide or use the land for any purposes except agriculture in order to reap the tax benefits. I'd be curious to know how many of the properties in the way of the train are in the Williamson Act, and if the state is offering appraised Williamson Act value, or commercial land value?
ETA: Rereading both Chris' and Firethorn's posts, I think I'm actually in agreement with them regarding market value.