Supreme Court hears arguments over PennEast pipeline plan

May 10, 2021

The legal fight over New Jersey blocking a natural gas pipeline boils down before the US Supreme Court to the question of whether it is legitimate for a federal agency to delegate to a private party the power to exercise the federal government’s eminent domain authority.

The Supreme Court heard arguments Apr. 28 in the case of PennEast Pipeline Co. LLC v. New Jersey, in which the state has insisted it cannot be sued by PennEast to enforce eminent domain authority because the Eleventh Amendment to the Constitution bars citizens of one state from suing another state without that state’s consent.

The Federal Energy Regulatory Commission (FERC), with authority under the Natural Gas Act to approve the routes of interstate gas pipelines, approved the PennEast project in 2018. The act includes a provision for pipeline companies to exercise eminent domain.

Paul Clement, a Kirkland & Ellis LLP attorney representing PennEast, told justices that in such a situation, the pipeline company is not acting as a private citizen but as a deputy or agent of the federal government, which means the amendment does not apply. FERC has delegated eminent domain authority to companies for 80 years, he said.

Clement argued that New Jersey, in blocking the pipeline, was refusing to acknowledge the supremacy clause of the constitution, which gives federal law—in this case the Natural Gas Act—supremacy over state law and courts.

FERC’s role considered

Questions from the justices indicated they were concerned with the extent to which FERC delegated authority to the pipeline company and left details to the company. Justice Elena Kagan asked, for example, if there was any supervision of PennEast by FERC?

Clement said FERC considered the proposed route, listened to objections from all parties, and made more than 70 route modifications. A private party like PennEast only acts when it has FERC certificates of public convenience and necessity, he said.

New Jersey’s position relies wholly on the Eleventh Amendment, a position that was accepted by the US Court of Appeals for the Third Circuit. Were FERC suing the state to accept eminent domain authority for the pipeline route, rather than leaving the suit to PennEast, the state would not have any argument, the Supreme Court justices indicated.

The federal government sides with PennEast in the case. A ruling presumably could occur before the court’s current term ends, typically in late June or early July.

Defending state interests

New Jersey has refused to allow the company to use eminent domain law to build the pipeline across two state-owned properties and 40 parcels of land where the state has obtained easements for conservation, recreation, or agricultural purposes.

Jeremy Feigenbaum, a New Jersey assistant attorney general, told the Supreme Court that the Eleventh Amendment’s prohibition of private lawsuits against states was important because a private party might not show the caution and care that a federal agency would show toward a state government’s concerns.

Industry groups have warned that if New Jersey’s position is upheld, states and private property owners could block pipelines through agreements on conservation easements straddling the planned route.

Feigenbaum cast doubt on that idea, saying there was no indication that states have done that elsewhere, such as in oil pipeline cases.

Justice Stephen Breyer noted that pipelines can be controversial, and that this was true back when the Natural Gas Act was written in 1938. His implication was that states most definitely might try to block interstate pipelines.

PennEast, a limited liability company, is owned by a Spectra Energy Corp. master limited partnership and 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 project, originating in Pennsylvania and running eastward, would be 116 miles long plus four miles of laterals. The company estimates it could place the project in service in 2024.