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Nor Is Condemnation a Trivial Affair

By Soledad M. Valenciano

Soledad Valenciano is an attorney in San Antonio, where she practices eminent domain litigation. Her firm exclusively represents property owners. Valenciano is the president of the San Antonio Chapter of the FBA and is a frequent speaker on eminent domain issues. She co-authors the “Federal Court Update” published in the San Antonio Lawyer Magazine. ©2021 Soledad M. Valenciano. All rights reserved. The hacking of Colonial Pipeline and the resulting images of gasoline hoarding, long lines at the gas pumps, and yellow flags symbolizing “No Gas” proved to be a stark reminder that, regardless of any push for a greener planet, Americans rely heavily on natural gas and petroleum products.

According to the New York Times, Colonial Pipeline is one of the largest interstate pipelines in the United States, connecting Texas to New Jersey, traversing some 5,500 miles and carrying 3 million barrels of fuel per day.1 (See Figure 1.) It is an older pipeline, built in 1961 by several pipeline companies that joined together to meet the rapid growth in highway driving and long-distance air travel.

According to the National Council of State Legislatures,3 as of 2009, two-thirds of the lower 48 states depended almost entirely on interstate pipeline systems for natural gas supplies. Figure 2 illustrates this “intricate network.”4

According to the U.S. Department of Transportation’s (USDOT’s) Bureau of Transportation Statistics, the United States maintains a staggering 2 million miles of pipelines transporting natural gas or crude oil.5 Seen by some as a safer alternative to physically transporting natural gas by truck or rail, and considered a step in the right direction in terms of decreasing U.S. dependency on foreign oil, interstate pipelines transporting natural gas or crude oil still prove to be persona non grata.

Protests have successfully derailed some development of interstate pipelines in recent years.6 The Constitution Natural Gas Pipeline was rejected by the state of New York, Northeast Supply Enhancement Natural Gas was “buried in red tape,” and the Atlantic Coast Natural Gas Pipeline was canceled after several years of litigation.7 Some protests are due to fear of leaks. According to the Hill Country News, natural gas pipeline leaks involve volatile fuel, made up mostly of methane, and between January 2010 and November 2017, the nation’s natural gas transportation network leaked a total of 17.55 billion cubic feet of mostly methane gas.8 Other protests include concerns about crossing sacred tribal lands and other natural and cultural features.9

Protests opposing the construction of natural gas pipelines often begin at the regulatory phase when the public first learns of the proposed project. Interstate pipelines are managed by the Federal Energy Regulatory Commission (FERC) and USDOT. FERC regulates pipelines, storage, natural gas transportation in interstate commerce, and liquefied natural gas facility construction.10 The Natural Gas Act of 1938 (NGA) conferred the authority on FERC’s predecessor agency (the Federal Power Commission) to review and grant certificates for the construction and operation of interstate natural gas pipelines and facilities. Prior to receipt of a “certificate of public convenience and necessity” and pursuant to section 7 of the NGA, gas pipelines typically undergo an extensive pre-filing and filing process with FERC that includes the review and approval of the siting of new lines. This process includes, for example, preparing environmental assessments under the National Environmental Policy Act (NEPA), reviewing route alternatives, and coordinating with the various federal agencies from whom permits may be required related to wetlands and endangered species considerations.11

It follows that when the applicant for the certificate actually possesses the certificate and begins to exercise the power of eminent domain to acquire easements, private property owners are less than happy. As an eminent domain attorney representing property

Legend Interstate pipelines Instrastate pipelines

Source: U.S. Energy Information Administration, About U.S. Natural Gas Pipelines

Figure 2. U.S. Interstate Pipeline System

owners in Texas, I am very familiar with property owners being more concerned about decreased property values; they worry about explosions, leaks, loss of privacy, construction problems, injury to livestock, erosion, subsidence, and other incidents. The private landowner facing eminent domain is at the mercy of an alleged public project and has little to no ability to stall that project, and even less leverage when hauled into federal court in the instance of interstate pipelines.12 Regardless of the judicial forum, the private landowner is repeatedly “reminded” of the constitutional right to receive just or adequate compensation, which can be of little solace when non-compensable damages are the real issue. After all, condemnation is not a trivial affair. It is far from it.

This constitutional protection of “just compensation” can be further soured when the private property owner becomes skeptical of the “public” nature of the project, such as when the condemnor is a private entity like “Exxon” or “Philips 66.” This sentiment is not uncommon in Texas, where eminent domain authority is conferred on private companies by statute.13 Examples of private entities authorized by law to condemn property include gas or electric corporations, groundwater conservation districts, and common carrier pipelines.

Given this experience, I found the dispute between PennEast Pipeline Company and the State of New Jersey, et al.,14 very compelling. This dispute, recently argued before the U.S. Supreme Court, questions the authority of private pipeline companies to condemn state-owned land. Honestly, I felt little sympathy for New Jersey when it cried foul when its property was condemned by PennEast, LLC, for a natural gas pipeline. After all, New Jersey includes public and private entities, as well as “New Jersey” itself, in its state statute’s definition of “condemnor.”15 How can New Jersey complain about losing property to eminent domain when New Jersey also condemns property for roads, bridges, power lines, and more? How can New Jersey credibly complain that it must contend with a unilateral process that takes land for which New Jersey had other plans? How can New Jersey complain that its investment-backed expectations have been upended? How can New Jersey complain that it has to spend its resources on experts and attorneys without the right to be reimbursed for those expenses? Indeed, New Jersey did not enjoy a taste of its own medicine.

Taking a step back, however, New Jersey’s protests stem from a place of reason and mirror the disappointment of the typical condemnee. Accepting the legal constraints of being a condemnee is difficult. In addition to experiencing the one-sided nature of the process and the reality of what damages are actually compensable, there is the pressure to accept an alleged public use, even when that public use feels tenuous. Enter PennEast, LLC, a private company that seeks to condemn land under a purported federal right of eminent domain (although the United States is not a party), is not directing the project, and is not acquiring title to any of the property to be condemned.

But, PennEast Pipeline Co., LLC v. New Jersey, et al never gets to the issue of the alleged public use. Rather, the legal issues focus on the parties themselves, each seemingly on the wrong side of the “v.” Here, the condemnor is a private rather than governmental entity, while the condemnee is the state of New Jersey (and various arms of the state),16 not a private property owner. The specific issues before the U.S. Supreme Court are (1) whether the NGA delegates to FERC certificate-holders the authority to exercise the federal government’s eminent-domain power to condemn land in which a state claims an interest; and (2) whether the U.S. Court of Appeals for the Third Circuit properly exercised jurisdiction over this case. The parties do not dispute that under the NGA, companies with the FERC certificate to build new interstate pipelines can use the power of eminent domain to seize property along the pipeline route. At issue is whether a state can block the proposed condemnation of state-owned property by claiming sovereign immunity under the Eleventh Amendment.

Here, in 2016, PennEast submitted its application to FERC to construct and operate a 116-mile natural gas pipeline through Pennsylvania and New Jersey. In 2018, FERC issued a “certificate of public convenience and necessity” (certificate) which allowed the company to acquire rights of way for its pipeline. New Jersey opposed the pipeline at the FERC level and then before the U.S. Court of Appeals for the District of Columbia Circuit. Not waiting for the appeals, and during the time of several abeyances, PennEast began efforts to acquire pipeline easements. Some of those property interests belonged to New Jersey, and New Jersey did not agree (as it had in the past) to waive sovereign immunity. Therefore, PennEast filed several eminent domain actions in federal court against the New Jersey entities (collectively “New Jersey”), and New Jersey asserted sovereign immunity. The district court disagreed with New Jersey, stating, “PennEast has been vested with the federal government’s eminent domain powers and stands in the shoes of the sovereign.” In other words, PennEast’s lawsuits were akin to a suit by the federal government. New Jersey appealed and reasserted immunity under the Eleventh Amendment. PennEast responded that its power of eminent domain in this instance stemmed from the NGA. The U.S. Court of Appeals for the Third Circuit agreed with New Jersey and found that, while the NGA may have delegated the federal government’s power of eminent domain to private parties, the question of New Jersey’s sovereign immunity from suits in federal court was an entirely separate and distinct matter. In other words—a key issue is that the property owner at issue is a sovereign state.

New Jersey deftly responded to each of PennEast’s arguments. It explained that neither the Commerce Clause nor the Necessary and Proper Clause of the U.S. Constitution permitted Congress to subject the states to private suits to condemn their property. The NGA’s silence on the issue does not mean the states abrogated their sovereign immunity. Moreover, the lawsuits in question were not “commenced” or “prosecuted” by the United States. Rather, the United States “played

zero role” in the litigation says New Jersey. New Jersey responded to Commerce Clause references, reminding the court that, unlike a post office or a courthouse, the property condemned will not belong to the United States if condemned; it will belong to a private entity. New Jersey cited to Allen v. Cooper, 17 a 2020 Supreme Court decision that held that Congress can subject an unconsenting state to suit only if two distinct conditions are satisfied: (1) “some constitutional provision must allow Congress to have … encroached on the States’ sovereignty,” and (2) “Congress must have enacted ‘unequivocal statutory language to overcome the States’ Eleventh Amendment Immunity.” New Jersey also pointed to consistent rulings in the Tenth Circuit.

In addition to the NGA’s silence, the Energy Policy Act of 2005, which amended the NGA, lends further support to the immunity bar. New Jersey also questioned any reason to rely on other statutes, like the Federal Power Act, that actually were amended to remove any ability to subject states to private suits. (This language that was removed from the Federal Power Act did not exist in the NGA.) New Jersey also questioned PennEast’s interpretation of the “Plan of Convention,” relying instead on Hans v. Louisiana, an 1890 Supreme Court decision that quoted Federalist No. 81, and emphasized that the states entered the Union with their sovereignty intact, that immunity from private suit was an indispensable aspect of that sovereignty, and that this immunity extends beyond what is explicit in the (amended) text.18 At the core of New Jersey’s argument is that consent by the states to be sued by the federal government simply does not extend to suits by the federal government’s private designee.

PennEast’s true argument seemingly is that if the Third Circuit’s decision stands, it will give states “a veto power over federally approved pipelines.” PennEast’s practical argument is that New Jersey’s position will result in “thousands of jobs lost, millions of foregone tax revenues, and tens of millions in increased consumer costs.”

In terms of the jurisdictional question, both PennEast and New Jersey contend that the Third Circuit properly exercised jurisdiction. While New Jersey was strong on the immunity argument, its reliance on the procedural inconsistencies inherent in the FERC process may not win the day. According to New Jersey, Section 7 certificates “are not final enough for aggrieved parties to seek relief in court, but they are final enough for private pipeline companies to go to court and take property by eminent domain.”19 New Jersey stated,

Congress cannot, and did not, force a state to participate in a second federal suit in order to vindicate its sovereign privilege not to be sued in the first suit, particularly when the second suit cannot even begin until the State has been ordered to surrender possession of its land. Nor, for that matter, can a State be coerced into participating in FERC’s certificate adjudication and its ensuing rehearing proceeding just to retain a complete Eleventh Amendment defense against private condemnation suits.20

The United States, which was asked to weigh in, disagreed, however. It argued that, under the NGA, any challenge to an authority granted in a pipeline certificate must be brought on “direct review” in the circuit court reviewing that certificate. Here, that court would have been the D.C. Circuit, not the Third Circuit. As a result, the federal government says, the Third Circuit (as well as the district court) lacked jurisdiction to review New Jersey’s challenges to the use of eminent domain because those challenges were separate collateral proceedings barred by the NGA.

If the United States solicitor general is correct, then the issue of immunity would not be heard. A punt like this may be exactly what the natural gas industry wants and needs. According to the amicus briefs, PennEast alone “would generate an estimated 12,000 jobs, $740 million in wages, and $900 million in energy savings.”21 Industry Amici, representing the American Petroleum Institute, the American Gas Association, and the Interstate Natural Gas Association of America, stated, “Industry Amici submit this brief because the decision below gravely threatens the continued development of federally approved interstate natural gas infrastructure as well as the ability of the natural gas industry to ensure reliable access to a supply of natural gas adequate to meet the nation’s energy requirements” and because interstate natural gas pipelines have become “[t]he arteries of the Nation’s energy infrastructure.”22

The Third Circuit understood PennEast’s “warn[ing] that [the Third Circuit’s] holding … will give States unconstrained veto power over interstate pipelines, causing the industry and interstate gas pipelines to grind to a halt—the precise outcome Congress sought to avoid in enacting the NGA.”23 Indeed, the Third Circuit stated that it was “not insensitive to those concerns and recognize[d] that [its] holding may disrupt how the natural gas industry, which has used the NGA to construct interstate pipelines over State-owned land for the past eighty years, operates.”24 Perhaps this is why the Third Circuit offered an end-run, suggesting that FERC condemn the properties and then transfer the properties to PennEast. FERC weighed in and conclusively stated it would not have the authority to condemn.25

As an attorney exclusively representing property owners in eminent domain proceedings, it is not lost on me that I was most moved by amici curiae comprising state and local governments.26 Voicing their support for New Jersey, the property owner stated,

This Court will not, however, assume that a statute makes such a fundamental change unless the statutory language is unmistakably clear that Congress intended to do so. … The clear statement rule applies forcefully in the Eleventh Amendment context, but the court has made it clear that it is not limited to that context. Instead, it applies whenever “Congress intends to alter the ‘usual constitutional balance between the States and the Federal Government.”27

After all, condemnations are “major intrusions.” They are not trivial affairs.28 

Update: On June 30, 2021, in a 5-4 opinion by Chief Justice Roberts and supported by liberal and conservative justices, the U.S. Supreme Court held that when FERC issues a certificate of public convenience and necessity, federal law authorizes the certificate's holder “to condemn all necessary rights-of-way, whether owned by private parties or States … [and although] nonconsenting States are generally immune from suit, they surrendered their immunity from the exercise of the federal eminent domain power when they ratified the Constitution.”

Endnotes

1How Colonial Pipeline Became a Vital Artery for Fuel, https://www. nytimes.com/2021/05/10/business/colonial-pipeline-ransomware. html (last visited May 14, 2021). 2Id.