On Tuesday, June 29, 2021, the United States Supreme Court reversed the Third Circuit and held that Section 717f(h) of the Natural Gas Act authorizes Federal Energy Regulatory Commission (FERC) certificate holders to “condemn all necessary rights-of-way, including land in which the State holds an interest.” See PennEast Pipeline Co., LLC v. New Jersey, Slip Op. No. 19-1039, (June 29, 2021). This holding is consistent with history and precedent regarding the superior power of federal eminent domain.
The Natural Gas Act (NGA), 15 U. S. C. §717f(e), passed in 1938 to regulate the transportation and sale of natural gas, requires a natural gas company to obtain a certificate of public convenience and public necessity prior to building an interstate pipeline. The NGA, as originally enacted, granted certificate holders only an illusory right to build pipelines because it contained no mechanism for the acquisition of lands necessary to build. But Congress amended the NGA in 1947 to authorize certificate holders to exercise the federal eminent domain power.
In 2015, PennEast Pipeline Co., a joint venture owned by several energy companies, applied to FERC for a certificate of public convenience and necessity authorizing the construction of a 116-mile pipeline from Luzerne County, Pennsylvania, to Mercer County, New Jersey. In January 2018, after reviewing thousands of comments and holding several public hearings, FERC granted PennEast a certificate of public convenience and necessity.
PennEast filed various complaints in Federal District Court in New Jersey seeking to exercise the federal eminent domain power under §717f(h) by condemning 42 parcels of land along the pipeline route approved by FERC in which either New Jersey or the New Jersey Conservation Foundation asserted a property interest. PennEast also sought preliminary and permanent injunctive relief allowing it to take immediate possession of each property in advance of any award of just compensation. New Jersey moved the District Court to dismiss PennEast’s complaint on sovereign immunity grounds, which the District Court denied, but the Third Circuit vacated the District Court order reasoning that §717f(h) did not clearly delegate to certificate holders the Federal Government’s ability to sue nonconsenting States. Thus, it concluded that PennEast could not exercise federal eminent domain to condemn New Jersey Land.
At issue was whether the Federal Government can constitutionally confer on pipeline companies the authority to condemn necessary rights-of-way in which a State has an interest. The Supreme Court held that it can and reversed. As a threshold matter, §717f of the NGA confers upon pipeline companies a right to condemn private or state-owned lands. The Court reasoned that the Federal Government has exercised its eminent domain authority since the founding, connecting our country through turnpikes, bridges, and railroads—and more recently through pipelines, telecommunications infrastructure, and electric transmission facilities, and for as long as the eminent domain power has been exercised by the United States, it has also been delegated to private parties. Moreover, the Court has consistently upheld private delegatee’s exercises of the federal eminent domain power—"whether through the upfront taking of property or a condemnation action, and whether against private property or state-owned land.” Id. at 2.
The effect of the Supreme Court’s ruling in PennEast Pipeline Co., LLC is that natural gas companies holding a FERC certificate of public convenience and public necessity do not need a state’s consent to acquire necessary right-of-way to condemn state-owned land along the pipeline route approved by FERC. Instead, natural gas companies may exercise federal eminent domain powers either through upfront taking or condemnation action.