The U.S. Supreme Court later this month will hear a case involving eminent domain for an interstate pipeline builder that wants to condemn state-owned land for the project.
The PennEast pipeline is being built from Luzerne County in northeastern Pennsylvania across 116 miles to New Jersey to carry natural gas from the Marcellus shale to the east. However, the state of New Jersey does not want the project to be built through state-controlled parcels of conservation land, and is arguing that the pipeline company’s attempt to take the property through eminent domain is unconstitutional.
The case hinges on the Natural Gas Act, a 1938 law that allows private companies to seize needed parcels of land for pipeline projects if they have obtained a certificate of necessity from the Federal Energy Regulatory Commission.
While the NGA gives companies the right to take property through eminent domain if it cannot reach an agreement on compensation, New Jersey is arguing that PennEast’s condemnation of public land violates the 11th Amendment, which gives states sovereign immunity protecting them from private lawsuits.
In 2019, a Third Circuit Court of Appeals panel reversed a lower court decision and held that condemning public land violates the 11th Amendment. PennEast appealed the decision to the Supreme Court, which has agreed to hear it on April 28.
“The Third Circuit recognized that a contrary holding endorsing private condemnation actions against a nonconsenting State would work a serious affront to state sovereignty,” New Jersey’s brief in support of the Supreme Court argument states.
However, PennEast disagrees. “Congress passed the Natural Gas Act specifically to avoid state and local vetoes of interstate projects found by federal regulators to be in the public need and benefit. The misguided Third Circuit ruling in fall 2019 turned nearly 80 years of federal government interpretation and industry practice on their heads,” Tony Cox, chair of the Board of Managers of the PennEast Pipeline Co. said in a news release, “In its written response before the U.S. Supreme Court last spring, the State of New Jersey even agreed that the U.S. Constitution allows the federal government to condemn state property and took issue only with whether it can delegate that authority to a private party.”
The outcome could have big implications for the oil and gas industry, as pipeline developers have routinely received the federal approvals they need to use eminent domain to obtain needed property, and FERC is now revisiting its policy on determining the need for a project and the use of eminent domain.