Paying the Pied Piper: Third Circuit Court of Appeals Court Rules That State Law Applies in Federal  Eminent Domain Suit

by: Anthony F. Della Pelle
31 Jul 2019

In TENNESSEE GAS PIPELINE COMPANY, LLC v. PERMANENT EASEMENT FOR 7.053 ACRES, et als, the United States Court of Appeals for the Third Circuit faced an issue of first impression, and held that State eminent domain law must be applied in federal takings matters. Tennessee Gas Pipeline Company, a private utility corporation, holds   a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC), which allows the private company to take property under the Fifth Amendment for pipeline projects, once attempts at an amicable purchase do not succeed. These entities are given the same power as the government. Private pipeline companies have the power of eminent domain under  the Natural Gas Act of 1938 (NGC), which permits  them to  construct, operate, and maintain natural gas pipelines, after they receive their certificate from FERC

The land in this case is a 975-acre tract of land in Pike County, Pennsylvania which is owned by King Arthur Estates. The issue before the court was the determination of  “just compensation” for the  land taken. Tennessee Gas argued that the proper calculation involves the federal law method of diminution, or that compensation was to be determined based upon the market value of the land using a simple “before and after” value calculation. King Arthur Estates argued that not only should Tennessee Gas pay the diminution value, but also for “severance damages” representing the loss in value to of the remaining property, and also consequential damages such as costs and fees, pursuant to  Pennsylvania state law. The difference between the two cost determinations was nearly $1 million. The District Court for the Middle of Pennsylvania ruled in favor for Tennessee Gas on this point on a motion for summary judgement, and that decision was appealed by King Arthur Estates.

On appeal,  the Court of Appeals decided whether the federal government’s diminution value of the property was the only mode of recovery under the NGC, or if state law claims may also be a mode of recovery. The Third Circuit Appeals Court, in a 2-1 decision, decided that a party may recover under state law claims as well under the NGC. Their decision rested upon two similar cases which occurred if the Fifth and Sixth Circuits, Georgia Power Company v. Sanders, 617 F.2d 1112 (5th Cir., en banc, 1980) and Columbia Gas Transmission Corporation v. Exclusive Natural Gas Storage Easement, 962 F.2d 1192 (6th Cir. 1992), which found that private entities under similar federal laws had to pay compensation based upon state eminent domain law.

This decision did include a strong  dissenting opinion which stated that since eminent domain originates in the Fifth Amendment of the United States Constitution, and the law in question was a federal statute, then only the federal method should apply.  Since the opinion included a dissent, Tennessee Gas could seek review by the United States Supreme Court.  We’ll keep tabs on this matter and let you know what develops.

For more about Tennesee Gas, a great analysis and a copy of the decision is available from our friends at here.

For a short explanation of the case and facts, you can read the article published by Courthouse News Service here.

The author acknowledges the assistance of William Olson, a summer intern at McKirdy, Riskin, Olson & DellaPelle, in preparing this article.  Mr. Olson is a member of the Day Class of 2021 at Rutgers Law School.