PennEast Pipeline Co. LLC is turning to the Federal Energy Regulatory Commission to help overcome an unfavorable U.S. Court of Appeals for the 3rd Circuit ruling that threatens to hold up the project and could unsettle the process of taking land for gas pipelines.
At issue is a potentially far-reaching September ruling that found state sovereign immunity prevented PennEast from pulling states into federal court for condemnation proceedings.
The case centered around the 116-mile, 1.1-Bcf/d PennEast Pipeline's efforts to condemn roughly 40 properties owned at least in part by the state of New Jersey, some of which were preserved for conservation, recreation or agriculture.
PennEast Pipeline on Oct. 4 asked FERC to provide as early as possible its "authoritative interpretation" of the Natural Gas Act eminent domain authority. Such action "will be of substantial assistance" as courts consider whether the act's Section 7 authorizes pipeline developers holding a FERC certificate to bring condemnation action involving a property in which the state claims an interest, the developer said. It asked for expedited action in time for further 3rd Circuit proceedings in the PennEast case, in which the pipeline company has asked for more time to appeal. (PennEast Pipeline v. A permanent easement for 1.74 acres, et al., 19-1191)
Some observers have suggested that the 3rd Circuit ruling could drive developers to avoid routes crossing states lands and create opportunities for obstruction in states opposing pipeline development. Critics of the current process see the ruling as promising to tip the balance back toward states' rights.
Road map for obstruction
The 3rd Circuit ruling found that nothing in the Natural Gas Act suggested Congress intended to delegate to private companies the federal government's exemption from state sovereign immunity. Rather, sovereign immunity goes to the core of the national government's constitutional design, and accepting PennEast's delegation theory would dramatically undermine careful limits the Supreme Court has placed on abrogation, the ruling found.
PennEast and an industry coalition led by the Interstate Natural Gas Association of America have expressed concern that upholding the state's invocation of sovereign immunity would cause the industry and interstate gas pipelines to grind to a halt.
The 3rd Circuit ruling, a federal district court ruling in Maryland, and "inevitable attempts by landowners and other states to extend these decisions to other jurisdictions will substantially impede the ability of natural gas companies to develop natural gas infrastructure," PennEast wrote. The ruling presents a road map for private landowners to seek to transfer strategically a partial interest or conservation easement to a state, in an effort to block a pipeline once an early route is unveiled, PennEast contended.
Constitutional questions
To help in a likely appeal, PennEast asked FERC to find that Natural Gas Act condemnation authority applies to a property in which a state holds an interest. It also asked FERC to find that Congress delegated the federal government's eminent domain authority to pipeline certificate holders, and — importantly — to find that Congress delegated the federal government's exemptions from claims of state sovereign immunity.
PennEast offered FERC its own analysis of why no constitutional concerns exist. The developer argued that Congress was well aware of the constitutional framework and that Congress would not enact a statute providing siting of interstate natural gas pipelines without extending the power of eminent domain to state-owned lands.
"All in all, I think this shows how consequential the 3rd Circuit decision is, but also how difficult it may be to overturn it," said Gary Kruse of LawIQ, an energy-focused consulting group. While PennEast is soliciting a FERC interpretation of the Natural Gas Act to which the courts could defer in this case, he was unsure how much weight a FERC interpretation would have, given recent legal attacks on the deference that courts have given to federal agency interpretations.
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.
