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Court Rules Against Pipeline Condemnation of State-Owned Lands

On Tuesday, the U.S. Court of Appeals for the Third Circuit, the federal appeals court responsible for cases arising in New Jersey, Pennsylvania, and Delaware, ruled for the state of New Jersey and against the developers of the PennEast natural gas pipeline.

The pipeline company, holder of a license from the Federal Energy Regulatory Commission (FERC), had filed suit against the state and other property owners under the Natural Gas Act to exercise eminent domain over lands needed to construct its 116-mile pipeline from Luzerne County, Pa., to Mercer County, N.J.  Among the lands subject to the condemnation were properties and easements owned by the state of New Jersey, including 40 parcels subject to state-held agricultural protection and open space easements. New Jersey objected to the condemnation of these lands citing several grounds, but the federal district court granted the condemnation in December 2018. The state appealed.

In its Sept. 10 decision, the Court of Appeals held that the Natural Gas Act does not confer on a private company the ability to bring a condemnation action in federal court against a state (or its instrumentalities). The 11th amendment to the Constitution as interpreted by the federal courts, prevents a private party from bringing suit against a state in federal court without the state’s consent. While the federal government can bring suit against states and is not subject to this sovereign immunity, the same is not true of private entities — even private entities using federal condemnation powers under the Natural Gas Act. 

The Court of Appeals reversed the district court and directed that all claims against the state be dismissed. Citing precedents, the court noted that it was in “deep doubt” that the United States can “delegate its exemption from state sovereign immunity to private parties.” But it noted that it “need not definitively resolve that question today because nothing in the (Natural Gas Act) indicates that Congress intended to do so.” Without a clear, valid Congressional abrogation of a state’s immunity from suit, the condemnation action cannot proceed.

The implications of this decision are significant. If a state is unwilling to negotiate an easement for an interstate natural gas pipeline over its lands and easement interests, it is immune from suit in federal court – which leaves condemnations up to whether the state has consented to such condemnations in state court under state laws. Given the widespread use of farmland and conservation easement lands in many states, the Third Circuit’s decision could change the balance of power between states and pipeline companies concerning routing and location of pipelines. 

It is very likely that PennEast will seek rehearing, and then review in the U.S. Supreme Court.

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