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Justices Weigh Pipeline Company’s Right to Grab State Land (1)

April 28, 2021, 6:04 PM; Updated: April 28, 2021, 7:36 PM

U.S. Supreme Court justices appeared conflicted as they weighed state sovereignty and property rights concerns against natural gas pipeline development.

The court heard oral arguments on Wednesday over whether builders of the PennEast pipeline can use federal eminent domain to seize state-owned lands along the $1 billion project’s route in New Jersey. The case, which could affect pipeline siting nationwide, is the latest high-stakes energy infrastructure conflict to reach the justices in recent years.

“It’s really quite extraordinary to have private parties overriding state immunities,” Chief Justice John Roberts said, voicing New Jersey’s key argument in the case that’s expected to be decided by the end of June.

But Roberts and other justices also had tough questions for the state, asking whether its position relegated the federal government to a “junior varsity sovereign.”

The U.S. Court of Appeals for the Third Circuit in 2019 said PennEast couldn’t use eminent domain to take state-owned lands because the condemnation proceedings would infringe on New Jersey’s sovereign immunity. PennEast says that interpretation would give states “veto authority” never envisioned by Congress when it passed the Natural Gas Act.

‘At the Mercy of New Jersey’

Kirkland & Ellis LLP’s Paul Clement, representing PennEast, told the court the company becomes a “limited federal actor” once it receives Federal Energy Regulatory Commission approval that delegates federal eminent domain authority.

In that scenario, New Jersey has no sovereign immunity to protect it against a condemnation lawsuit, he said, adding that the proceeding is technically against the land itself, not the state. And pipeline companies pursue such actions only after FERC has completed a public process and issued a certificate, he said.

“Once that happened, the way it has worked for 70 years is that the certificate holder then gets to go to federal court,” he said.

Several members of the court appeared receptive to PennEast’s concerns about how the Third Circuit’s opinion could give states too much power to block natural gas pipelines.

Justice Stephen Breyer pointed to decades of history of gas pipelines built across state-owned lands and asked whether a ruling for New Jersey would disrupt existing infrastructure. Justice Brett Kavanaugh built on that line of questioning, asking Clement what exactly would happen if the court sided with New Jersey.

“If we lose this case, then this pipeline will not be built at least anything like its current configuration,” Clement said, adding that the company would “be at the mercy of New Jersey” because there’s no way to completely avoid state lands.

State Solicitor Jeremy Feigenbaum acknowledged that New Jersey opposes PennEast. But he said the industry’s arguments about broad development disruptions are overblown, as evidenced by the fact that New Jersey has approved other natural gas projects recently, and that oil pipelines and electric transmission line developers routinely negotiate with states because they lack eminent domain power.

Further, Feigenbaum said, New Jersey believes the federal government can itself take state land for a natural gas pipeline if it chooses to do so. It just can’t delegate that authority to a private company, he said, because the Natural Gas Act said nothing to abrogate states’ sovereign immunity in that context.

Justice Samuel Alito suggested state’s argument was focused on form over function. “Is New Jersey’s dignity really in any kind of practical terms compromised to a greater degree based on the caption of the lawsuit?” he asked.

But the state’s position got some traction with Justice Elena Kagan, who said she wondered “whether there’s not something that’s really lost by giving this over to private parties who have their own interests separate and apart from what the government’s might be.”

The Biden administration is backing PennEast in the case, a move that disappointed many environmental advocates. Edwin S. Kneedler, arguing for the U.S., told the Supreme Court on Wednesday that states never had immunity in this context in the first place.

Jurisdiction

The justices largely ignored another legal issue in the case: the Justice Department’s argument that the Third Circuit never should have heard the state’s eminent domain arguments because the Natural Gas Act requires challenges to interstate gas pipeline approvals to go through FERC before going to court.

Federal government lawyers say the state’s litigation over PennEast’s eminent domain authority amounted to a “collateral attack” on the pipeline’s FERC approval. That argument has drawn the interest of property rights advocates, who say it would prevent many private landowners from fighting for their own property.

Construction hasn’t started on PennEast, which would stretch nearly 120 miles across Pennsylvania and New Jersey and is backed by Enbridge Inc., Southern Co., and other companies. The pipeline faces other permitting and legal obstacles even if it prevails at the Supreme Court.

Matthew Littleton, a Donahue, Goldberg, Weaver & Littleton lawyer who represented the New Jersey Conservation Foundation in the case, said the state presented a compelling argument that’s likely to win over a majority of justices.

“New Jersey gave a very clear and compelling presentation to the justices today, making clear that Congress did not and could not subject the state to PennEast’s eminent domain suits,” he said.

PennEast spokeswoman Patricia Kornick said the company is “confident in the arguments presented today during oral arguments before the U.S. Supreme Court and its briefs filed with the Court.”

New Jersey Attorney General Gurbir S. Grewal (D) said in a statement the state was “proud to press our case to the Supreme Court this morning, and look forward to a decision in the coming months.”

The case is PennEast Pipeline Co. v. New Jersey, U.S., No. 19-1039, oral arguments 4/28/21.

(Adds comments from Grewal, Littleton, and Kornick in final section.)

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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