Circuit Court Bars Use of Natural Gas Act Condemnation Authority Against States by Pipeline Developers in Federal Courts
September 13, 2019
In recent months, two courts—a federal district court in Maryland and the U.S. Court of Appeals for the Third Circuit (encompassing Pennsylvania, New Jersey, and Delaware) have ruled that states enjoy “sovereign immunity” to lawsuits by pipeline developers to condemn state-owned lands. See In re PennEast Pipeline Company, LLC, Nos. 19-1191 to -1232 (3d Cir. Sept. 10, 2019) & Columbia Gas Transmission, LLC v .12 Acres of Land, CA No. GLR-19-1444 (D. Md. Aug. 22, 2019). In the hands of pipeline opponents and unsympathetic states, the rulings could serve as real impediments to efforts to cross state lands.
The United States has the right to exercise eminent domain over private property, a right which is constrained by the Fifth Amendment’s requirement that the property be for a “public use” and that the government pay for it. The United States also has the right to delegate its eminent domain authority to private entities such as railroads and utilities.
In the Natural Gas Act (NGA), Congress delegated eminent domain authority to private companies to acquire the necessary rights of way for their pipelines. Those entities may bring actions in either federal district court or in state court provided they meet three conditions. First, they must have a certificate of public convenience and necessity from FERC. Second, they must show they have been unable to acquire the property from the owner. And, third, the value of the property must exceed $3,000. 15 U.S.C. § 717f(h).
The NGA’s condemnation authority is used extensively by pipeline developers to gain access to the properties of private citizens. But when it is used in federal court to dispossess states of their property, it encounters the 11th Amendment to the Constitution. That Amendment provides that the “Judicial power of the United States” does not extend to actions against one state by citizens of another. But the immunity is broader even than set out in the Constitution because, as the Third Circuit recognized, the sovereign immunity of the States pre-dates the Constitution. Accordingly, in the Third Circuit, “States are not ‘subject to suit in federal court unless’ they have consented to suit, ‘either expressly or in the plan of the [Constitutional] convention.’” In the Constitutional Convention, the States impliedly consented to be sued by the federal government in federal court but did not consent to suits by private parties. See PennEast, 14 (citing Blatchford v. Native Village of Noatak, 501 U.S. 775, 779-82 (1991)). Thus, the federal government is “exempt” from the sovereign immunities accorded the States by the 11th Amendment.
PennEast, after obtaining a FERC certificate, sued New Jersey in federal court to exercise eminent domain over numerous parcels along the path of its proposed pipeline. The State asserted “sovereign immunity.” In response, PennEast argued that just as the NGA had delegated the federal government’s authority to condemn property to FERC certificate holders, so too had Congress delegated its exemption from the 11th Amendment. Thus, reasoned PennEast, by obtaining a FERC certificate it had been delegated the federal government’s exemption from the 11th Amendment immunity prohibition on suing states in federal court. The Third Circuit disagreed. It ruled that the federal government’s eminent domain authority and its exemption from the 11th Amendment are separate, and the NGA’s delegation of eminent domain authority to FERC certificate holders did not also include a delegation of the 11th Amendment exemption. Continuing, the Court ruled that while Congress had delegated eminent domain authority to FERC certificate holders, it had neither abrogated  states’ immunity nor delegated an exemption from it to FERC certificate holders.
Nonetheless, the Court closed by stating that it was “not insensitive” to the disruption that its ruling could have to pipeline development or to the “unconstrained veto power” its ruling could give States (which could, under the ruling, block the use of eminent domain in federal court by acquiring property in front of pipelines). To this end, the Court observed that a “work-around” might be achieved by allowing FERC to exercise the right of eminent domain and then authorizing FERC to transfer title to private developers.
PennEast responded to the “work-around” suggestion by expressing concerns that the NGA does not provide such authority to FERC. The Court replied in two ways. First, it observed as a Constitutional matter that the federal government undeniably has the authority to exercise eminent domain—how else could it have delegated it to FERC certificate holders under the NGA? Second, however, the Court acknowledged that the mechanics of the NGA might not expressly confer the initial authority on FERC. In that instance, the Third Circuit wished the industry luck in its dealings with Congress and bid it adieu. PennEast, 34 (“In any event, even if the federal government needs a different statutory authorization to condemn property for pipelines, that is an issue for Congress, not a reason to disregard sovereign immunity.”).
Likewise, in Columbia Gas Transmission, the U.S. District Court of Maryland ruled in August that the Commonwealth of Maryland enjoyed sovereign immunity from an action to condemn an easement under state-owned rail-trail. The ruling blocked a pipeline that Columbia Gas proposed to pass under the Potomac River into West Virginia. See also Sabine Pipe Line, LLC v. A Permanent Easement of 4.25 Acres of Land in Orange County, Texas, 327 F.R.D. 131 (E.D. Tex. 2017). In Sabine, a pipeline operator regulated by the NGA had operated a pipeline for decades. In some areas, it possessed rights of way (ROW) that it had negotiated with a landowner. The ROW were of limited duration and had to be renewed. The landowner sold parcels subject to the existing ROW to a state wildlife agency which then declined to renew the ROW. Sabine then sued the state agency in federal court to condemn a ROW, but the Court dismissed the case on 11th Amendment grounds.
The Courts in Columbia Gas and PennEast did not discuss the NGA provision authorizing eminent domain actions in state, as well as federal, courts. See 15 USC § 717f(h). The Court in Sabine, however, noted that the NGA vests jurisdiction over condemnation actions in state courts as well, and suggested: “Sabine may attempt to proceed in another forum.” 327 F.R.D. at 145. Left undiscussed, however, is whether such actions in state court are also prohibited by the concept of sovereign immunity. See Alden v. Maine, 527 U.S. 706 (1999) (limiting authority of Congress to subject nonconsenting states to suit in state courts).
 The Court also observed that while Congress can abrogate the States’ sovereign immunity, it can only do so by clear and unequivocal language missing from the NGA. Further, it noted that Congress enacted the NGA under its Commerce Clause authority, but that since the Supreme Court’s ruling in Seminole Tribe of Fla. v. Florida, 517 U.S. 44 (1996) Congress could not rely on the Commerce Clause as the basis for abrogating state sovereign immunity. See PennEast, 16 & 21-22 (citing Seminole Tribe). Accordingly, the Court suggested there was no clear statutory path for abrogating state immunity.