3rd Circuit Sides With New Jersey in Pipeline Construction Dispute

A natural gas pipeline in Alaska.

PHILADELPHIA (CN) – The Third Circuit Tuesday ruled that New Jersey should not be required to condemn certain parcels of property that a natural gas company wishes to seize in order to construct a pipeline. 

The circuit court vacated a lower court’s ruling that had granted PennEast Pipeline Co. orders of condemnation and preliminary injunctive relief for immediate access under the Natural Gas Act, finding that New Jersey is entitled to sovereign immunity.  

“New Jersey’s sovereign immunity has not been abrogated by the NGA, nor has there been – as PennEast argues – a delegation of the federal government’s exemption from the State’s sovereign immunity,” U.S. Circuit Judge Kent Jordan, a George W. Bush appointee, said in the ruling. 

The Natural Gas Act allows private gas companies to acquire “necessary” parcels of land for their pipelines via eminent domain if they are not able to privately settle the matter with land owners and have obtained a certificate from the Federal Energy Regulatory Commission – provided that the parcel in question is worth more than $3,000.

When PennEast was granted the right to seize 35 of New Jersey’s properties via eminent domain for a proposed 116-mile pipeline that would run from Pennsylvania to New Jersey, the state appealed. U.S. Circuit Judges Kent, Stephanos Bibas, and Richard Nygaard heard the appeal in June.

“PennEast warns that our holding today 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,” Kent wrote. “We are not insensitive to those concerns and recognize that our 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.”

However, he noted that interstate gas pipelines can still proceed. 

“New Jersey is in effect asking for an accountable federal official to file the necessary condemnation actions and then transfer the property to the natural gas company,” Kent said. “Whether, from a policy standpoint, that is or is not the best solution to the practical problem PennEast points to is not our call to make. We simply note that there is a work-around.”

He further noted that the text of Natural Gas Act does not indicate that Congress intended for pipeline companies to be able to seize state land via a condemnation suit. 

Kent remanded the matter to the U.S. District Court for the dismissal of the claims against New Jersey.

In a statement, New Jersey Attorney General Gurbir S. Grewal said the ruling was great news for the state and the environment.

“We will not hesitate to stand up to private companies when their actions violate the law – or, in this case, the U.S. Constitution,” Grewal said. “From the very beginning, we have made clear that the Eleventh Amendment prohibits private pipeline companies like PennEast from condemning state properties for private use, and we’re pleased that the Third Circuit agreed with our position.”

PennEast’s attorney did not immediately respond to requests for comment Tuesday evening.

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