The Supreme Court of the U.S. is expected to rule soon in a case that could have a profound impact on the development of natural gas pipelines. The case, PennEast Pipeline Co., LLC v. New Jersey, involves a natural gas pipeline project in the northeast. PennEast obtained a certificate of public convenience and necessity from the Federal Energy Regulatory Commission for the construction of a natural gas pipeline. It then filed suit seeking to acquire a right of way over 131 properties in New Jersey for its project. The State of New Jersey, which claimed some interest in 42 of those properties, objected, arguing that it was entitled to the protection of sovereign immunity. Broadly stated, sovereign immunity provides that a state may not be haled into federal court unless Congress has abrogated the state’s immunity pursuant to certain constitutional powers or the immunity was necessarily surrendered by the state in entering into the federal plan of government. The district court rejected the state’s argument, finding that sovereign immunity did not apply to a case brought under the federal eminent domain power. On appeal, the Third Circuit overruled the trial court, holding that, while it was doubtful that the federal government could authorize an eminent domain suit by a private party against a state, it did not need to reach that question because the Natural Gas Act, under which PennEast was proceeding, did not clearly provide for such a suit. PennEast appealed to the Supreme Court.
PennEast’s argument focuses on the fact that the Natural Gas Act authorizes holders of certificates from FERC to wield the federal government’s eminent domain power. Both New Jersey and the Third Circuit acknowledge that sovereign immunity would not stand as an impediment to a suit to establish just compensation if brought directly by the federal government, as previous Supreme Court precedent established that states necessarily surrendered their immunity from such suits. PennEast argued that the Natural Gas Act allows it to stand in the federal government’s shoes and, accordingly, allows it to proceed against the state’s property just as the federal government can. Under its theory, the fact that the Natural Gas Act authorizes it and other holders of FERC certificates to exercise the federal eminent domain power is enough. There is no need for a statutory abrogation of sovereign immunity because the states enjoy no immunity from such suits to abrogate.
New Jersey, on the other hand, argued that the Third Circuit was absolutely correct in drawing a distinction between the federal government’s eminent domain power and the exception it enjoys from state sovereign immunity claims. While sovereign immunity protects states from being haled into court by private parties, it does not protect them from being sued by the federal government. Thus, when the federal government condemns state-owned land directly, it exercises both its supreme eminent domain power as well as its ability to sue the states without their consent. While the eminent domain power can be delegated, the exception to state sovereign immunity protection that the federal government enjoys likely cannot be bestowed on private parties. Even if it can, Congress would be required to clearly articulate its intent to do so in a statute. The Natural Gas Act’s provision dealing with eminent domain makes no mention of the states or sovereign immunity and so cannot serve as such a waiver.
If New Jersey wins, states that own land in the path of proposed natural gas pipeline projects will likely face pressure from environmental groups and other pipeline opponents to object and block such projects. While most states are able to reach agreement to transfer the land needed for pipeline projects amicably, they will have less incentive to do so if the pipeline company cannot take the property through an eminent domain proceeding should negotiations fail. Ultimately, a state win in this scenario will likely mean that Congress will need to step in to fix the problem legislatively, likely by requiring the federal government to bring the condemnation suit directly for any property in which a state claims an interest.
A decision is expected before the end of the Court’s current term.
Matt Hull is a Pender & Coward attorney focusing his practice on eminent domain/right of way, local government, and waterfront law matters.
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