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Third Circuit Raps Pipeline on Fair-Market Failures

 (CN) — Natural gas companies can no longer rely on federal law to pay less than fair-market value for land seized by eminent domain for pipeline construction, the divided Third Circuit ruled Tuesday.

The reversal comes two years after a federal judge denied a $3 million demand by King Arthur Estates in compensation for the 7 acres of land in Pike County, Pennsylvania, seized by Tennessee Gas Pipeline.

In a 2-1 opinion, U.S. Circuit Judge Joseph Greenaway Jr. noted that federal law is typically used to determine compensation value, but the law lacks real guidelines as to what constitutes just compensation. 

“Because federal law does not supply a rule of decision on this precise issue, we must fill the void with a common law remedy,” Greenaway wrote for the majority. 

The 32-page opinion also emphasizes that, under Pennsylvania law, private property owners are able to get more money out of the condemned than they would under federal law. This would mean the pipeline would have to pay approximately $1 million more in compensation under state law than federal. 

U.S. Circuit Judge Michael Chagares said in a 9-page dissent that the issue of just compensation from an eminent-domain power is clearly defined as federal law under the Fifth Amendment. 

“Because Congress has authorized natural gas companies to invoke the federal eminent domain power under the NGA,” Chagares wrote. “And because exercise of that power entitles a landowner to just compensation under the Fifth Amendment, the question of just compensation in an NGA condemnation action is a question of federal substantive right to which federal substantive law applies.” 

Judge Greenaway was joined in the majority by U.S. Circuit Judge Thomas Ambro.

Representatives for the pipeline declined to comment on the ruling. The pipeline is represented by the firm Saul Ewing, while King Arthur’s Estates is represented by the firm Levy Stieh of Milford, Pennsylvania.

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