The US Court of Appeals for the 3rd Circuit held the Natural Gas Act (NGA) does not allow private pipeline companies to condemn state property interests to secure routes for their pipelines.  In Re: PennEast Pipeline Company.  The NGA delegates to private parties the federal government’s eminent domain power  to acquire routes for approved pipelines.

Penneast, after securing permission from the Federal Energy Regulatory Commission (FERC) to build a pipeline, proceeded to condemn various properties along the approved pipeline route in New Jersey.  In approving the route, FERC knew some of the properties were owned by or subject to ownership interests (such as easements) of the State of New Jersey.  As part of the condemnation process, Penneast sued in federal court to obtain immediate possession and for a determination of the compensation for the property owners.

NGA Did Not Delegate Power to Sue a State in Federal Court
New Jersey moved to dismiss the case, saying the NGA did not delegate to private companies the power to force a state into federal court; moreover, New Jersey argued the US Constitution would not allow for any such delegation.

The 3rd Circuit discussed the NGA’s delegation to private companies.  While the 3rd Circuit acknowledged the NGA delegated eminent domain power, the Court said the power to force a state into federal court was a separate federal power that the NGA did not delegate to pipeline companies.  The Court rejected Penneast’s argument that FERC interpreted the NGA as delegating eminent domain power even as to states, because the approved route passed through state property.  Moreover, the 3rd Circuit expressed doubt that the US Constitution would allow such delegation, due to the 11th Amendment, but determined the NGA did not do so, in any event.

Fix Will Require Congressional Action
Penneast argued this decision will effectively give states veto power over pipeline projects.  For example, states can acquire easements that have little or no impact on the landowners’ operation, such as an easement to restrict activity to agriculture for property used for farming and likely to be farmed for a long time.  This would then allow the state to oppose using the property for a pipeline.

The 3rd Circuit acknowledged this reality, and said Congress could address the problem by changing the NGA to allow a federal agency to acquire  state property, and then have the federal agency transfer the property to the pipeline.  The current NGA has no such provision; the Court made no mention of the current political climate, which makes any such modification of the NGA a practical impossibility.

For a copy of the 3rd Circuit’s opinion