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New Jersey Defends its Sovereignty after PennEast petitions the Supreme Court

Penneast Pipeline Company is seeking relief from the United States Supreme Court in order to build the Penneast pipeline through the use of federal eminent domain. The pipeline has been a source of controversy in New Jersey, as environmental groups and the State continue to oppose its construction. Application for the pipeline was filed with the Federal Energy Regulatory Commission (“FERC”) in 2015 and approved pursuant to the Natural Gas Act (“NGA”), 15 U.S.C. § 717 et seq. The NGA permits land for approved projects to be taken by petitioning a district court for the right of eminent domain. See 15 U.S.C. § 717f(h). However, what happens when the petitioner attempts to exert eminent domain over State-owned lands? On June 2, 2020, New Jersey filed an opposition to PennEast’s petition to the High Court, seeking relief from a Third Circuit decision which found in New Jersey’s favor and foiled PennEast’s best laid pipeline plans.

The construction plans entail building an interstate natural gas pipeline from Luzerne County, PA to Mercer County, NJ. Penneast has sought condemnation of 42 property interests of the State of New Jersey on which to build its pipeline. Most of these property interests involve easements for the preservation of land for recreational, conservation or agricultural uses. In 2018, PennEast filed condemnation actions in the U.S. District Court for the District of New Jersey, seeking an immediate possession of property and an injunction preventing New Jersey from interfering. According to the State, “PennEast made no good-faith effort to seek these state properties by negotiation before resorting to condemnation actions.” Opposition Brief for the State of New Jersey, Penneast Pipeline Company, LLC v. State of New Jersey et al. (2020).

The U.S. District Court granted PennEast’s application in December 2018, opining that PennEast was vested with the federal government’s eminent domain powers. New Jersey appealed, arguing that the condemnation action against the State violated the 11th Amendment of the U.S. Constitution, which guarantees State sovereign immunity from out-of-State private parties. The Third Circuit sided with New Jersey and reversed the District Court decision.

The Appellate Panel (Judges Bibas, Jordan and Nygaard) characterized the question at hand as this: whether the federal government delegated to PennEast the power to file a condemnation action against the State when it enacted the NGA. The Court held that Congress’s intent to delegate that authority and “upend a fundamental aspect of our constitutional design” must be “unmistakably clear,” and under that standard, the text of the NGA simply does not support such an intent. The Court declined to answer the broader question of whether the United States has the ability to delegate its right to sue States in the first place.

PennEast now brings this application to the United States Supreme Court. In the meantime, PennEast petitioned FERC, seeking a declaratory order for the scope of the eminent domain power prescribed in the NGA. Under President Trump’s administration, which released an Executive Order prioritizing energy infrastructure, FERC sided with PennEast. The FERC order explains that project owners’ right to exercise eminent domain is not limited by State-owned land. FERC Declaratory Order, 170 FERC ¶ 61,064. It should be noted that FERC is independent from direct presidential oversight. However, its chairman, Neil Chatterjee, was nominated by the President and generally aligns with the President’s priorities.

While the FERC interpretation of the NGA bolsters PennEast’s argument to an extent, an agency interpretation of the Congressionally-enacted statute only goes so far when there is a constitutional question at hand. Ultimately, the Court may decline to address the constitutionally of federal delegation of eminent domain over the sovereign States, as did the Third Circuit.

Simply put, PennEast’s petition argues that eminent domain is clearly allowed by the NGA for State-owned lands and private lands alike, as evidence by historical practice, legislative history and the newly issued FERC directive. PennEast’s petition subverts New Jersey’s claim to sovereignty in this case, stating in its petition that “[t]he [Third Circuit decision] is the product of a misguided effort to avoid constitutional concerns that don’t exist[.]” It further argues that the decision disrupts energy infrastructure and threatens how the natural gas industry has operated for the past eighty years.

It is true that if the High Court upholds the Third Circuit decision, there will be a substantial effect on pipeline projects going forward, arguably chilling investment. However, a decision in New Jersey’s favor will be a win for the State, which cites the great value of preserving land from further development in the most densely populated State in the nation. Since President Trump and Governor Murphy entered office, we have been witness to major differences in environmental policy between the two, often leading to litigation. Ultimately, this dispute is a question of federalism, whether a State can maintain its property rights in the face of federal eminent domain. With a presidential administration that finds itself at insurmountable odds with some States, particularly on the coasts, this Supreme Court decision will undoubtedly have ripple effects.

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