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Supreme Court conservatives test reach of eminent domain in key case for pipelines


Industry has feared precedent could help states block projects

More liberal justices emphasize history, context for Natural Gas Act

Houston — As the US Supreme Court heard argument April 28 in a key case testing PennEast Pipeline's ability to pull a state into court to condemn property for construction, several conservative justices offered robust questioning of the pipeline project's position, which is generally backed by the federal government.

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At issue is a 3rd US Circuit Court of Appeals ruling that effectively blocked the interstate natural gas project's condemnation of more than 40 properties in which New Jersey held an interest, throwing into question the pipeline route.

The 116-mile, 1.1 Bcf/d project would link Marcellus Shale dry gas production with markets in Pennsylvania, New Jersey and New York.

The 3rd Circuit 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 that would allow the companies to bring states into federal court for condemnation proceedings. In doing so, the court recognized its ruling might disrupt the gas industry practice, going back over 80 years, of using the NGA to construct interstate gas pipelines over state-owned land. PennEast appealed the decision to the high court.

State's rights raised

Chief Justice John Roberts pressed PennEast for examples "outside the area of eminent domain where the federal government can delegate its powers to a private party and then a private party can exercise those powers in a way that's inconsistent with state rights."

PennEast counsel Paul Clement, in response, suggested PennEast was "deputized" by the federal government and was "really exercising the federal power directly."

Justice Samuel Alito questioned whether it was a fair inference that states at the framing of the US Constitution would realize they were surrendering their sovereign immunity with respect to a private party that might be deputized to exercise that power.

And Justice Amy Coney Barrett asserted, that in regard to certain arguments related to the plan of the Constitutional convention, she didn't see any historical support for the proposition that a state could be sued by a private party standing in the stead of the federal government's eminent domain power.

Among the court's more liberal members, some of the questioning aligned with the gas industry and government argument. Justice Stephen Breyer drew attention to the context for passage of the Natural Gas Act, enabling gas pipeline construction at a time when states were objecting in "multiple, complex ways" to pipeline development crossing the county.

"This was passed to build a pipeline. How could they have done it? I don't see it. I don't understand how any reasonable person would have delegated any eminent domain power to the Natural Gas Act, which was for interstate pipelines, without including power to proceed against the state," he said. "That's been the understanding for the last 80 years," he said.

Sotomayor, as well, says that history was "very important" to her, and that states had not previously asserted the argument because "there was no sense that there was a sovereign immunity to the exercise of eminent domain by the federal government or a state against its own citizens."

'Junior varsity sovereign'

The questioning did not fall neatly along party lines, however.

Justice Brett Kavanaugh focused on what would happen if PennEast lost the case. To that, Clement replied that "this pipeline will not be built, at least at anything like its current configuration."

"And depending on exactly how we lose this case ... this federal interstate pipeline, until the law is changed, will be at the mercy of New Jersey, because I don't think there is a way to reroute this pipeline in a way that doesn't implicate a state interest in land," Clements said.

Roberts also pressed New Jersey about whether its opposition to the project does not present a practical problem. He questioned whether the "federal government in this scenario does become a junior varsity sovereign" with the state blocking the gas certificate issued by the federal sovereign.