By Bob Fallon, Engleman Fallon, PLLC,

On Friday, October 4th, PennEast Pipeline Company, LLC filed at the Federal Energy Regulatory Commission (FERC) asking FERC to declare that holders of FERC certificate can take — by eminent domain — property in which a state has an interest.  See FERC Docket No. RP20-41, comments due October 18, 2019.

In re PennEast Pipeline Co. LLC, No. 19-1191, the 3rd Circuit said that the 11th Amendment to the U.S. Constitution bars a certificate holder from bringing an action in federal court under Section 7(h) of the NGA to condemn property in which a state or its agencies hold an interest. The court acknowledged that its decision threatened to disrupt how the natural gas industry had constructed pipelines over State-owned land for the past eighty years. Nevertheless, because “[b]roadly speaking … States enjoy sovereign immunity from suits by private parties in federal courts,” (Slip op. at 4), the court concluded that gas pipeline companies cannot under the 11th Amendment “hale unconsenting States into federal court to condemn State property interests.” (Id. at 1)

PennEast said (i) the decision presents “an immediate and serious obstacles to the administration of one of the most fundamental provisions of the NGA, and uproots nearly 80 years of Commission practice (PennEast Petition at 1), (ii) the decision calls into question the efficacy of the NGA’s condemnation authority, which the FERC has recognized to be “a necessary part of the statutory scheme to regulate the transportation and sale of natural gas in interstate commerce,” (Id. at 1-2), (iii) the court reached its decision without the benefit of FERC interpreting the scope of the eminent domain authority in NGA Section 7(h) and (iv) the court’s decision is subject to further proceedings, including rehearing and if rehearing is not successful, presumably appeal to the United States Supreme Court.  Therefore, PennEast asks FERC to provide an authoritative interpretation of the NGA’s eminent domain authority by issuing the following declarations:

 (1) Under Natural Gas Act (NGA) Section 7(h), a certificate holder’s authority to condemn “the necessary right-of-way to construct, operate, and maintain a [natural gas] pipeline” and the “necessary land or other property, in addition to right of-way, for the location of compressor stations [and other associated equipment],” applies to property in which a state holds an interest;

(2) In NGA Section 7(h), Congress delegated the federal government’s eminent domain authority to certificate holders; and 

(3) In delegating the federal government’s eminent domain authority in NGA Section 7(h), Congress necessarily delegated to certificate holders the federal government’s exemption from claims of state sovereign immunity. 

PennEast asks the FERC for a decision by November 1, 2019.  PennEast explains:

It is critically important to the development of pipeline projects, including but not limited to the PennEast Project, that the Commission has already found to be in the public convenience and necessity, and to the development of future pipeline infrastructure to serve the Nation’s rapidly growing energy needs, that the Commission issue an order on this Petition at the earliest possible time, and thereby provide its authoritative interpretation of the NGA’s eminent domain authority. Because PennEast intends to seek rehearing of the Third Circuit’s decision, expedited action would allow the Commission’s interpretation of NGA Section 7(h) to be considered in any rehearing by the Third Circuit of its decision in In re PennEast Pipeline Company, LLC. PennEast respectfully submits that the Commission’s interpretation will be of substantial assistance as courts consider the scope of NGA Section 7(h) and whether it authorizes certificate holders to bring a condemnation action involving property in which a state claims an interest.  (Id. at 44)

FERC established a comment date of October 18, 2019, “[i]n light of the petitioner’s request for expedited treatment, and the significance of the issues presented.”