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Tug of war emerges at FERC over ruling on eminent domain for gas pipelines

Lacking jurisdiction, the Federal Energy Regulatory Commission would be usurping the judiciary branch's role if the agency were to weigh in to help PennEast Pipeline Co. LLC overcome a key legal setback, according to an array of state regulators, environmental groups and property rights advocates.

These claims emerged in comments to FERC made public on Oct. 18 and Oct. 21. So, too, did a swath of opposing arguments from trade groups representing pipeline companies and gas distributors jumping in on PennEast's side, urging FERC to help maintain an 80-year-old practice surrounding eminent domain and avoid the potential for immediate disruption to infrastructure development connecting production to consumers.

At issue is a Sept. 10 U.S. Appeals Court for the 3rd Circuit ruling that found state sovereign immunity prevented the 116-mile, 1.1-Bcf/d natural gas pipeline project from pulling New Jersey into federal court to condemn more than 40 properties in which the state has an interest. The PennEast pipeline would connect Marcellus Shale dry gas production to markets in Pennsylvania, New Jersey and New York.

Pipeline developers warn of far-reaching implications for pipeline siting if the 3rd Circuit ruling stands.

Expedited request

Facing a deadline for an appeal, PennEast asked FERC to issue an expedited declaratory order with its own "authoritative interpretation" that Natural Gas Act, or NGA, condemnation authority applies to a property in which a state holds an interest (RP20-41). It also wants FERC to find that Congress delegated the federal government's exemptions from state sovereign immunity.

The Interstate Natural Gas Association of America, or INGAA, which represents large-scale pipeline operators, told FERC that PennEast's request "aligns perfectly" with Congress' intent when it delegated to FERC certificate holders the federal government's right of eminent domain through a 1947 amendment to the NGA.

The Senate report accompanying the amendment explained that certain states would not otherwise grant eminent domain under state law if the pipeline would not serve customers in the state, the INGAA said. Left to stand, the 3rd Circuit decision would leave room for states to block federally approved pipelines, turning back the clock to before Congress delegated eminent domain powers, INGAA argued.

Gas distributors also lent support. The American Public Gas Association said the court ruling would adversely affect the ability of local utilities to obtain new pipeline capacity and access to natural gas supplies.

Subverting judicial process

Multiple critics of PennEast's request argued that FERC lacks the power to weigh in on matters of Constitutional authority, sovereign immunity and congressional intent after the 3rd Circuit — the appropriate legal authority — has ruled.

The state of New Jersey, for one, said PennEast is taking an unprecedented step by going to FERC in search of a "do-over" after losing on a question of statutory interpretation before the 3rd Circuit, which has already heard and resolved the same claims. FERC also lacks jurisdiction because the petition would conflict with a final FERC order, currently on appeal, in which the commission said it would leave questions of PennEast's eminent domain authority to the appropriate courts to resolve, New Jersey added.

FERC should dismiss the petition because of "extremely concerning constitutional questions of separation of power and federalism," said the Niskanen Center, advocating for property owners, in joint comments with the New Jersey Conservation Foundation. "[T]he commission's willingness to indulge the petition at all would be a flagrant attempt by a federal agency to subvert the judicial process," the groups said.

Sen. Cory Booker, D-N.J., said a declaratory order would infringe on a coequal branch's role as the ultimate arbiter of law; the Environmental Defense Fund contended that granting the request would enable forum shopping that would undermine authority of the federal courts; and Delaware Riverkeeper Network agreed it is the role of the judiciary, not FERC, to decide state sovereign immunity issues.

PennEast spokeswoman Patricia Kornick, by contrast, argued that FERC's view is important because it is the agency Congress charged with administering the NGA.

Resistance in New Jersey

The debate comes as PennEast faces an uphill regulatory climb in New Jersey. Gov. Phil Murphy hailed the 3rd Circuit decision on Twitter Oct. 11, saying his administration "fought and won in court to stop" the project.

In doing so, he cited the state's commitment to "transitioning to 100% clean energy by 2050," and noted the state also denied and closed the project's application for a water quality and wetlands permit.

PennEast is resisting that permit decision. It wrote to New Jersey on Oct. 11 to say the state failed by its own rules to issue a deficiency letter in time and that the 3rd Circuit ruling did not provide a valid basis to decline to review a FERC-approved project. It pressed the state to proceed with processing the permit immediately.

Maya Weber is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.