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US district court denies challenge to eminent domain use for ACP, MVP pipelines

Highlights

Decision deflects one of multiple legal salvos aimed at ACP, MVP

Circuit court is the correct venue: judge

Washington — A federal district court set back another effort to block natural gas pipelines using the argument that federal procedures violate constitutional protections related to the use of eminent domain.

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The decision Friday in the US District Court for the District of Columbia to dismiss the case clears another potential sticking point for Mountain Valley Pipeline and Atlantic Coast Pipeline, two major gas projects that would move a combined 3.5 Bcf/d of Appalachian gas to Mid-Atlantic markets. It is the latest of several cases raising eminent domain issues to be denied in federal courts on jurisdictional grounds.

More than 50 landowners with property in the path of the projects had joined with the non-profits Bold Alliance, Bold Education Fund and Friends of Nelson in the complaint filed in the district last September (Bold Alliance v. Federal Energy Regulatory Commission, 17-cv-01822).

The litigation targeted the way eminent domain use has evolved in a deregulated gas market to take private property for pipeline development.

In finding the court lacked subject matter jurisdiction, Judge Richard Leon emphasized that "Congress could hardly have been more clear" that the avenue of review for parties aggrieved by FERC orders under the Natural Gas Act involves federal appeals courts, rather than the district court.

COURT FINDING

The plaintiffs failed to qualify for an exception to that avenue that is allowed for constitutional challenges directed at underlying agency authority, he said.

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The plaintiffs constitutional theories go to FERC's practice of adjudicating claims -- not to its power to do so, he said. "[P]laintiffs constitutional claims are deeply intertwined with allegations that FERC's practices deviate from the provisions of the Natural Gas Act." The complaint had alleged that FERC fails to require pipeline companies to demonstrate their projects serve a public use as required by the takings clause of the 5th amendment of the US Constitution. It also called FERC's standard of proof for need "so low as to be meaningless."

In the case of MVP, the suit alleged the project did not meet the public use standard of interstate transportation of gas because "it will transport gas for export, not for ultimate distribution to the American public." For ACP, it said the project failed to satisfy the standard because "it will deliver gas exclusively to utility affiliates of ACP's owners." It also faulted the practice of granting of certificates that allow powers of eminent domain to be conveyed to developers at a time when the orders are still conditioned on future regulatory signoffs, such as state water quality certificates.

CONSIDERING OPTIONS

Bold is currently considering its options and has preserved some of the constitutional arguments in its pending case with the US Court of Appeals for the District of Columbia Circuit seeking review of FERC's MVP approval, said Washington attorney Carolyn Elefant, who represented Bold in the case. Bold could file a notice of appeal and ask the district court to hold it in abeyance pending resolution of the separate MVP circuit court appeal, she said.

"I would not count out the prospect of relief," she added, noting that similar litigation is pending as well in New Jersey in relation to the PennEast Pipeline project.

William Scherman, a partner with Gibson, Dunn & Crutcher, said there is nothing remarkable about the decision "except it keeps happening. At some point, the environmental groups will realize they keep failing," in pursuing this line of attack, he said.

Similar to the finding Friday, in July the 4th Circuit Court of Appeals found a federal district court was correct to conclude it lacked jurisdiction over a suit that questioned whether FERC 's NGA procedures deprived landowners of constitutional rights (Orus Ashby Berkley, et al. v. Mountain Valley Pipeline, et al., 18-1042). A federal district court in Ohio in December also found a landowners' suit that raised eminent domain questions related to the Nexus Gas Transmission project was filed in the wrong court at the wrong point in the federal review process (Urban, et al v FERC, 5:17-cv-01005).

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com