II. The PennEast Pipeline Proposal, In re PennEast Pipeline Co., LLC, and Related Case Law
A. The In re PennEast litigation
The proposed PennEast pipeline is a new 116-mile natural gas pipeline that will transport gas from the Marcellus Shale in Luzerne County, Pennsylvania, to eastern markets in New Jersey, New York, and Pennsylvania. As proposed, it would carry approximately one billion cubic feet of natural gas—up to 1,107,000 dekatherms of energy—per day. PennEast filed its application for the pipeline in 2015, and FERC issued a CPCN for the project in early 2018. Having received a CPCN, PennEast initiated condemnation proceedings in federal court for 131 property interests it needed to start construction on the pipeline. There was only one problem: 42 of those property interests belonged to the state of New Jersey, which opposed pipeline construction. New Jersey refused to participate in the condemnation proceeding, arguing that its sovereign immunity deprived the U.S. District Court of jurisdiction.
The court disagreed, finding New Jersey’s immunity defense “inapplicable” in light of the NGA’s eminent domain provision. The court reasoned that because the NGA delegates the federal government’s eminent domain power to CPCN-holders, PennEast “stood ‘in the shoes of a sovereign’” and could therefore pierce New Jersey’s sovereign immunity in the same way that the federal government can.
New Jersey appealed the decision to the Third Circuit Court of Appeals, which expedited the appeal and halted pipeline construction pending its decision. Ultimately, the Third Circuit decided for New Jersey on the sovereign immunity issue, vacating the District Court’s order that the state’s property interests be condemned. In so holding, the Third Circuit made two critical findings and one policy argument. First, the court held that the District Court erred by conflating the federal government’s exemption from state immunity and federal eminent domain power. Explaining that these two federal prerogatives are different, the Third Circuit found that a delegation of eminent domain is generally not accompanied by a corresponding delegation of the federal government’s exemption from state immunity.
In support of this finding, the court cited Blatchford v. Native Village of Noatak, and decisions from its sister circuits, which collectively expressed doubt that the United States can delegate its exemption from state immunity claims at all. In Blatchford, the Supreme Court held that a group of Alaska Native villages could not sue a state for money under a revenue-sharing statute. Although the Blatchford decision did not involve pipeline siting, the plaintiff tribes had advanced an argument that the Third Circuit found analogous to PennEast’s. The argument was that 28 U.S.C. § 1362—a statute that was interpreted as a delegation of the federal government’s power to file suit in federal district court—also conveyed the federal government’s ability to sue states in federal court. In a portion of the decision relied upon by the Third Circuit, the majority of the Blatchford justices expressed doubt about that argument:
[I]t is impossible to imagine any more extreme replication of the United States’ ability to sue than replication even to the point of allowing unconsented suit against state sovereigns. . . . We doubt, to begin with, that that sovereign exemption can be delegated—even if one limits the permissibility of delegation . . . to persons on whose behalf the United States itself might sue.
Having found that a delegation of eminent domain is not accompanied by an implicit delegation of power to sue states in federal court, the court next looked in the NGA for an express delegation of such authority. The court acknowledged that although Congress has the power to subject states to lawsuits brought by private parties, it can only exercise that power through “unmistakably clear” statutory language. The court found such language missing from the NGA. Additionally, the court also noted that Congress can only abrogate state sovereign immunity when it passes a statute under section 5 of the Fourteenth Amendment. Because Congress passed the NGA pursuant to its Commerce Clause powers, the court reasoned that the constitutional basis for the NGA could not have authorized Congress to pierce state immunity in the first place.
Finally, the court questioned whether private eminent domain is good policy, due to its concerns about political accountability in condemnation proceedings:
[T]he condemning party controls the timing of the condemnation actions, decides whether to seek immediate access to the land, and maintains control over the action through the just compensation phase, determining whether to settle and at what price. The incentives for the United States, a sovereign that acts under a duty to take care that the laws be faithfully executed and is accountable to the populace, may be very different than those faced by a private, for-profit entity like PennEast, especially in dealing with a sovereign State.
It was partly due to this concern that the Third Circuit was not convinced by PennEast’s argument that FERC’s oversight of pipeline construction should mitigate any qualms about taking state property. Yet, the court clarified that the Eleventh Amendment, and not its policy concerns, were the basis for its holding.
After the Third Circuit issued its decision, PennEast filed a petition for a writ of certiorari with the U.S. Supreme Court. PennEast argued that not only would the Third Circuit’s holding fundamentally disrupt the natural gas industry, but also that the court’s statutory interpretation was faulty. Specifically, PennEast argued that the Supreme Court has consistently upheld statutes that delegate eminent domain power to private parties, and that when Congress has not intended to take state land through eminent domain, it has explicitly said so. Yet, despite PennEast’s critiques of the Third Circuit’s decision, the In re PennEast court was not the first to find that state immunity can halt construction of interstate natural gas pipelines.