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PennEast to continue environmental surveys through court stay

PennEast Pipeline Co. LLC would be able to continue environmental survey work needed to move its 1.1-Bcf/d natural gas pipeline project along in New Jersey, despite a partial stay to property condemnation issued by the U.S. Court of Appeals for the 3rd Circuit.

The 3rd Circuit on March 19 partially granted a stay sought by New Jersey state entities that have challenged the pipeline's condemnation rights, saying they violate sovereign immunity principles of the 11th amendment of the U.S. Constitution for states. (U.S. Court of Appeals for the 3rd Circuit dockets 19-1191, et al.)

Because the start of construction was not expected until later in 2019, the ruling may not affect the construction schedule, and instead enables PennEast to continue survey work it would need for its New Jersey application for a Clean Water Act Section 401 permit.

The 3rd Circuit stay allowed surveying and testing to continue, but in the event the pipeline advances to the construction phase, it puts a hold on construction pending the appeal. The court also agreed to expedite the litigation and assign the case to the first merits panel available after briefing.

The case involves New Jersey's argument that the condemnation of state-preserved properties was at odds with state policies of protecting open space and farmland. Under the state constitution, tax dollars are set aside to preserve these properties. State entities appealed a December 2018 federal district court ruling that granted PennEast's application for orders of condemnation and allowed immediate possession of state-preserved properties.

The 116-mile pipeline would connect Marcellus Shale dry gas production to markets in Pennsylvania, New Jersey and New York. It would offer a new outlet for gas leaving northeastern Pennsylvania. It potentially would reduce price spikes during high-demand periods and support added gas production as it bolsters supplies into the often constrained New York City market area.

"PennEast continues to make very good progress on the surveys in New Jersey and appreciates that the 3rd Circuit order allows PennEast to continue with those surveys," said Patricia Kornick, a spokeswoman for the project. Survey results will allow the project to submit applications to the New Jersey Department of Environmental Protection, she said.

"PennEast also views the expedited schedule positively and is confident the New Jersey district court's ruling will stand," she said.

Several analysts saw the stay as unlikely to impact the schedule at this point. "It appears unlikely that this stay, pending review, causes any incremental delay based on the status of other approvals, especially the CWA Section 401" in New Jersey, Christi Tezak, a veteran energy analyst with ClearView Energy Partners LLC, said in an email.

Gary Kruse, director of research for legal analytics company LawIQ, said the decision to allow survey work to continue was of great benefit to the developer, as that access faced an unusually lengthy holdup at the district court level. The stay only hinders the ability to construct and would only be a problem if the project was moving to construction in the next 60 to 90 days, which is not the case, he said.

Given the role New Jersey has played in challenging permissions for the project in various forums, the Section 401 approval may still present an obstacle going forward. Pennsylvania, in contrast, already granted that authorization in 2017. Pennsylvania also has deemed erosion and sedimentation control and waterbody applications administratively complete and recently completed a public comment period on those permits.

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