August 2021, Vol. 246, No. 8

Editor's Notebook

Midstream Wins a Big One

By Michael Reed, Editor-in-Chief

As most of you know, the U.S. Supreme Court, in what some people including me would consider at least a minor surprise, upheld PennEast Pipeline’s authority to use eminent domain to acquire access to state property.  

The 36-inch, 116-mile (187-km) pipeline was approved by the Federal Energy Regulatory Commission (FERC) back in 2018 and has faced a myriad of challenges ever since – one of which, obtaining the remaining permitting from the state of New Jersey for the second phase, could be more difficult to surmount than this high court victory.  

New Jersey has continued to oppose the pipeline’s construction throughout the process, and it did not consent to the seizure of properties the state owns or in which it has an interest.   

Nonetheless, this is a major victory for midstream and the utility industry. Among other things, the 5-4 decision states very clearly that the Natural Gas Act (NGA) does, in fact, sanction private companies to condemn public or private land for rights-of-way needed for projects deemed to be of benefit to the public as a whole.  

Speaking for the majority of the court, Chief Justice John Roberts wrote, “Over the course of the nation’s history, the federal government and its delegatees have exercised the eminent domain power to give effect to that vision, connecting our country through turnpikes, bridges, and railroads – and more recently pipelines, telecommunications infrastructure, and electric transmission facilities.”   

He added that allowing eminent domain helped secure the framers of the constitution’s goal of “cohesive national sovereign.”  

Certainly, the PennEast pipeline, which is designed to transport as much as 1 Bcf/d of natural gas from New Jersey and Pennsylvania falls within the parameters of which he spoke.  

The High Court’s conclusion “protects consumers who rely on infrastructure projects, found to be in the public benefit after thorough scientific and environmental reviews, from being denied access to much-needed energy by narrow state political interests,” said Anthony Cox, chairman of the PennEast board of managers.  

Earlier, CEA President David Holt said,  “This is a major step toward settling whether states can arbitrarily override settled and established federal laws that govern energy infrastructure and, more importantly, interstate commerce.”   

The decision itself sets aside a 3rd Circuit decision from 2019 that said  the NGA, while granting eminent domain powers, could not be used to circumvent a state’s sovereign immunity under the 11th Amendment of the U.S. Constitution, protecting it from  being brought to federal court involuntarily.  

Rejecting this contention, Roberts wrote that lawsuits of this nature “do not offend state sovereignty, because the states consented at the founding to the exercise of the federal eminent domain power, whether by public officials or private delegatees.”  

Lawyers for PennEast were correct in calling the case of “immense national importance,” considering to extent to which the natural gas industry relies on eminent domain and the frequency that pipeline projects are built on state-controlled land, including riverbeds, to avoid opposition.  

Additionally, in what could also be seen as a good omen related to the PennEast victory, the change of administrations at the White House did nothing to diminish the support for the project at the executive level.   

In a March 8 friend-of-the-court brief, acting Solicitor General Elizabeth Prelogar said the 3rd Circuit Court did not have jurisdiction to decide if the Natural Gas Act authorizes the pipeline company to condemn state property. She argued that New Jersey should have raised its challenge before FERC and during the appeals court review of the FERC decisions.    

PennEast, which is a joint venture of five companies including Southern Company and Enbridge, now expects to have the first phase of the project in service before 2022 is over. The second phase, which as stated earlier involves New Jersey permits, will be trickier but is projected by the company to be in service in 2024. 

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