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Natural Gas

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

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

Highlights

State, activists see no power for FERC 'do-over' after court ruling

Pipelines say FERC finding would match congressional intent

Washington — The Federal Energy Regulatory Commission lacks jurisdiction and would usurp the judiciary's role if it were to weigh in to help PennEast Pipeline overcome a key legal setback in the 3rd Circuit Court of Appeals, state regulators, environmental groups and property rights advocates have told FERC in comments made public Friday and Monday.

But trade groups representing pipeline companies and gas distributors have jumped 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 September 10 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. But 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 has asked FERC to issue an expedited declaratory order with its own "authoritative interpretation" that Natural Gas Act 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 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.

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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, the 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

But multiple critics of PennEast's request said FERC simply 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 said PennEast is taking the unprecedented step of 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, it 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.

Senator Cory Booker, Democrat-New Jersey, said a declaratory order would infringe on a coequal branch's role as the ultimate arbiter of law. The Environmental Defense Fund said 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, said 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. Governor Phil Murphy hailed the 3rd Circuit decision on Twitter October 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 New Jersey October 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, maya.weber@spglobal.com

-- Edited by Bill Montgomery, newsdesk@spglobal.com

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