Pipeline Progeny: The Bounds of Eminent-Domain Power and FERC Certificates

March 22, 2021

Companies seeking to enforce eminent-domain power pursuant to the Natural Gas Act (NGA) and FERC certificates should continue to monitor PennEast Pipeline Co. v. New Jersey and its progeny. 938 F.3d 96, 99 (3rd. Cir. 2019) (cert. granted). Although part of the dispute related to condemnation of land in which the state has an interest is pending before the U.S. Supreme Court, PennEast recently obtained summary judgment in a federal district court related to its condemnation of entirely private-owned land, strategically pursuing the construction of its pipeline on multiple fronts.

For those unfamiliar with the facts, PennEast plans to construct and operate a 120-mile natural gas pipeline from Pennsylvania to New Jersey. FERC approved its application in 2018 and issued a certificate of public convenience and necessity to PennEast. PennEast filed several condemnation suits against New Jersey and private landowners.

Regarding the state of New Jersey, on Sept. 10, 2019, the U.S. Court of Appeals for the Third Circuit held that the condemnation suits were barred by New Jersey’s Eleventh Amendment immunity. The Third Circuit distinguished between the federal government’s “power of eminent domain and its power to hale sovereign States into federal court.” Essentially, the court held that the delegation of eminent-domain power under the NGA to private parties does not also delegate the power to override Eleventh Amendment immunity. Thus, PennEast could not bring New Jersey into federal court to condemn the land in which the state has an interest.

This issue is pending before SCOTUS, and oral argument is scheduled for April 2021. The Supreme Court is likely to decide at least two issues: (1) whether FERC certificate-holders under the NGA have the authority to exercise the federal government’s eminent-domain power to condemn land with a state interest; and (2) whether the Third Circuit had jurisdiction over the case.

In contrast, private landowners have not enjoyed the same success. On Feb. 22, 2021, the Middle District of Pennsylvania granted summary judgment for PennEast related to the taking element of its condemnation action. As the court stated:

“The ability of government to condemn private property for public use, conditioned upon just compensation for the taking, is beyond dispute. … The instant case, however, turns this conventional wisdom on its head, for in this case the parties are contesting the plaintiff’s current legal ability to ‘take’ this property for public use as part of a pipeline project.”

PennEast Pipeline Co. v. Permanent Easement of .43 acre, et al ., No. 3:19-CV-464, 2021 WL 852125 (M.D. Pa. Jan. 29, 2021), report and recommendation adopted at 2021 WL 672586 (M.D. Pa. Feb. 22, 2021).

Notably, the Middle District rejected the private landowners’ attempt to rely on the New Jersey action and Third Circuit ruling. Finding this attempt “completely misplaced,” the Middle District noted that the New Jersey action only concerns property with a state interest, not entirely private property. The Middle District also relied on the Third Circuit’s finding that its decision was limited to state-interested property and “[i]nterstate gas pipelines can still proceed.”

Finally, the Middle District recognized that the FERC “certificate of public convenience and necessity gives its holder the ability to obtain automatically the necessary right of way through eminent domain, with the only open issue being the compensation the landowner defendant will receive in return for the easement .”

For these reasons, PennEast was “entitled to partial summary judgment [on the taking issue] and the case should proceed to a just compensation determination.”

While the Middle District of Pennsylvania’s opinion is not surprising, it shows that all eyes will remain on the U.S. Supreme Court’s PennEast decision. Any stray statement by SCOTUS, including dicta, may be used by plaintiffs’ counsel in future condemnation cases against all public and private property.