On December 9, 2020, the Acting Solicitor General filed a brief on behalf of the United States, as amicus curiae, in support of PennEast Pipeline Company’s petition for a writ of certiorari seeking review of a decision of the United States Court of Appeals for the Third Circuit in a closely-watched eminent domain case that has significant ramifications for interstate natural gas pipelines.  Left undisturbed, the Third Circuit’s ruling – as the Third Circuit itself acknowledged – risks disrupting how the natural gas industry has operated for decades in constructing interstate pipelines over State-owned land.

Background

The underlying case began with PennEast’s filing an eminent domain complaint in the federal District Court for New Jersey against properties in which the State of New Jersey claims an interest in order to acquire rights-of-way for its federally-approved, 116-mile interstate natural gas pipeline project.  The State argued that the Eleventh Amendment bars a holder of a certificate of public convenience and necessity (issued by the Federal Energy Regulatory Commission) from condemning property under the Natural Gas Act, 15 U.S.C. § 717f(h), in which a State holds an interest.  The District Court rejected this argument, explaining that PennEast “has been vested with the federal government’s eminent domain powers and stands in the shoes of the sovereign.”  Since there is no dispute that the federal government could exercise that power as to property in which the State has an interest, so too does a certificate holder who has been delegated the federal government’s power of eminent domain.

The State appealed, and the Third Circuit reversed the District Court and vacated the condemnation orders.  The Third Circuit found that the federal government uses two powers when it condemns State property: the federal eminent domain power and the federal government’s “exemption” from the Eleventh Amendment.  The Third Circuit ruled that the Natural Gas Act, 15 U.S.C. § 717f(h), does not clearly delegate the federal government’s ability to sue the States (and doubted whether it could do so, as a constitutional matter), and concluded that a private pipeline company such as PennEast cannot condemn lands in which the State holds an interest.

After unsuccessfully seeking rehearing en banc before the Third Circuit, PennEast petitioned the Supreme Court of the United States for a writ of certiorari.  A number of organizations submitted amicus briefs in support of PennEast’s petition.  Following its conference in late June, the Court invited the Solicitor General to file a brief expressing the views of the United States.

The United States’ Brief in Support of PennEast’s Petition

In urging the Court to grant PennEast’s petition, the United States argued that the Third Circuit erred at the outset in exercising jurisdiction over the State’s “collateral attack” on PennEast’s “authority to execute the terms of the FERC-issued certificate,” which provided for PennEast’s use of eminent domain to acquire property rights necessary to build the pipeline.  (See Br. at 7-8, citing City of Tacoma v. Taxpayers, 357 U.S. 320 (1958).)  That challenge, the United States argued, must be brought (if at all) only in a proceeding under the direct review provisions of the Natural Gas Act, 15 U.S.C. § 717r(b), seeking review of the certificate that FERC issued to PennEast – not in an eminent domain proceeding.  The United States acknowledged that the parties had not raised this argument, but argued that the Court is obligated to consider it because it questions the Court of Appeals’ jurisdiction.

Setting aside the threshold issue of jurisdiction, the United States also argued that the text, structure, and history of the Natural Gas Act demonstrate that certificate holders are authorized to acquire State-owned property through eminent domain.

First, the United States argued that the plain language of Natural Gas Act Section 717f(h) subjects to condemnation any property “necessary” for the construction of a pipeline, without regard to whether a State claims any interest, and expressly delegates the power of eminent domain to the certificate holder to overcome any barriers presented by holdout property owners.

Second, the United States argued that the structure of the Natural Gas Act reinforces the meaning of the plain language.  The Natural Gas Act commits decisions about the siting of pipelines to the federal government, and nowhere does the statute limit FERC’s authority to site pipelines on State-owned land.  In contrast, Congress has chosen to exempt State-owned land from the use of eminent domain in other statutes – most notably in the Federal Power Act.  Congress’ decision to amend the Federal Power Act in this respect is instructive for at least two reasons: (1) it shows “that Congress understood the then-existing wording of the [Federal Power Act]’s eminent domain provision – which was materially identical to the wording of [Natural Gas Act] Section 717f(h) – to authorize condemnation of State-owned land”; and (2) it shows that Congress chose not to create a corresponding exemption in Section 717f(h) of the Natural Gas Act, despite the material similarity of the statutory provisions.

Third, the United States argued that history demonstrates that the eminent domain power has been understood since before the Founding as capable of delegation to private entities for purposes that the sovereign deems in the public interest.  The United States highlighted, for example, the fact that “[i]n the nineteenth century, every state in the union delegated the power of eminent domain to turnpike, bridge, canal, and railroad companies.”  (Br. at 17, quoting Abraham Bell, Private Takings, 76 U. Chi. L. Rev. 517, 545 (2009).)  The United States pointed to the absence of cases questioning the delegation of broad eminent domain authority to private parties as “evidence that no constitutional concerns exist,” and distinguished cases involving “delegation of the government’s authority to enforce the law and impose monetary liability on States,” as presenting “distinct concerns” that do not arise in the Natural Gas Act context, where FERC controls the siting of pipelines and “where the purpose of the [condemnation] proceeding is to determine the amount of compensation to be paid to the State.”  (Br. at 18-20.)

In closing, the United States urged the Court to grant PennEast’s petition because the Third Circuit’s decision “threaten[s] to enable States to functionally nullify FERC’s pipeline siting decisions whenever they would affect” land in which the State possesses an interest – “potentially even when the State obtains the land or interest after FERC has approved the pipeline route.”  (Br. at 20-21.)  “Granting such veto power to the States would be directly at odds with the [Natural Gas Act’s] general purpose of ensuring a reliable and affordable interstate supply of natural gas, and the purpose of the eminent-domain provision in particular.”  (Br. at 21.)  The United States also noted its view that the disruption created (or threatened) by the Third Circuit’s decision “on a vital sector of the economy is too significant to leave it undisturbed.”  (Br. at 22.)

Closing Thoughts

The United States’ support of PennEast’s petition likely increases the probability that the Supreme Court will grant the petition – particularly since the Supreme Court invited the Solicitor General to express the government’s views.  It remains to be seen whether the Court will decide to take the case and whether the change in administrations will influence the views of the United States moving forward.