Supreme Court says PennEast Pipeline can use eminent domain on state property

The US Supreme Court ruled 5-4 that a pipeline company can use federal eminent domain authority to build a pipeline across state-owned land and private lands where easements have been granted by states.

The June 29 ruling resolved PennEast Pipeline Co. LLC v. New Jersey. The state had refused to allow the proposed PennEast natural gas pipeline to cross two parcels of state-owned land and 40 parcels of private land where environmental easements and other easements gave the state an interest.

When the company went to court to win enforcement of its authority to use eminent domain proceedings, New Jersey asserted its sovereign immunity protected it from a private party’s lawsuit. The US Court of Appeals for the Third Circuit accepted the state’s argument, but the Supreme Court overruled.

Federal eminent domain authority applies to state properties as well as private properties, Chief Justice John Roberts wrote for a narrow majority of the court.

“For as long as the eminent domain power has been exercised by the United States, it has also been delegated to private parties,” Roberts wrote of eminent domain power.

Politics and pipelines

Industry officials worried that the New Jersey strategy in this case, had it succeeded, could have pointed the way to states granting environmental easements specifically to obstruct pipelines.

Anthony Cox, chair of the PennEast board of managers, released a statement welcoming the decision not only for his company but because “it protects consumers who rely on infrastructure projects—found to be in the public benefit after thorough scientific and environmental reviews—from being denied access to much-needed energy by narrow state interests.”

He added that “PennEast understood that New Jersey brought this case for political purposes.”

PennEast, a limited liability company, is owned by Enbridge Inc. through its Spectra Energy Partners LP subsidiary, and by business units of gas utility New Jersey Resources Corp., gas and electric utility UGI Corp., gas utility South Jersey Industries Inc., and Southern Co.

The $1 billion project is planned to run 116 miles from Luzerne County, Pa., to Mercer County, NJ, for transmission of up to 1 bcfd of gas from the Marcellus shale region to utilities. The company has estimated it could place the project in service in 2024.

Split court on government rights

The Federal Energy Regulatory Commission (FERC) in 2018 granted PennEast a certificate of public convenience and necessity, and the commission has approved the route. Under a provision of the Natural Gas Act, FERC routinely delegates eminent domain authority to the company that will build a project.

A company tries to negotiate commercial terms for the right to cross property—with the understanding that the Fifth Amendment to the Constitution stipulates that private property cannot be taken for public use “without just compensation.” If agreement cannot be reached, the company can go to court.

In this case, New Jersey refused to allow the pipeline crossings, and in court the state asserted its sovereign right to refuse to accept a lawsuit from a private party, PennEast.

The divided court followed no standard ideological lines. Roberts’ opinion was joined by Justices Samuel Alito, Brett Kavanaugh, Stephen Breyer, and Sonia Sotomayor.

Justice Amy Coney Barrett wrote a dissent, with support from Justices Clarence Thomas, Elena Kagan, and Neil Gorsuch. She argued that states did not surrender their right of sovereign immunity from private lawsuits when they ratified the Constitution.

“The eminent domain power belongs to the United States, not to PennEast, and the United States is free to take New Jersey’s property through a condemnation suit or some other mechanism,” Barrett wrote.

 Her implication was that the condemnation or “other mechanism” would need to come directly from a federal agency such as FERC.