Federal Appeals Court Rules PennEast Cannot Haul State into Federal Court for Pipeline Takings

by: Joseph Grather
16 Sep 2019

We may be late to the party, as there has already been a lot of publicity over this decision, but thought we would add a few lines for our readers.

The Circuit Court immediately explained that the District Court granted PennEast “orders of condemnation and preliminary injunctive relief for immediate access to the properties.” Slip op. at 4.   “We will vacate because New Jersey’s sovereign immunity has not been abrogated by the NGA, nor has there been – as PennEast argues – a delegation of the federal  government’s exemption from the State’s sovereign immunity.” Ibid.  The import of this decision is in its irony – ordinarily private parties will fight to keep their properties and challenge takings viewed as unnecessary by government entity.  Here, a government entity was successful in stopping  a private party from taking the government’s property.

The September 10th opinion reminded me of one of my favorite quotes:

“Everybody has a plan until they get punched in the mouth.” Mike Tyson.

What’s going to happen now?  The decision means that the private pipeline company cannot take the properties owned by the State of New Jersey, or even those where the State has conservation easements and other rights.  This means that dozens of the properties which PennEast said would be necessary for its project are probably now off the table, unless it successfully appeals to the United States Supreme Court, or figures out another way to work around this new significant obstacle.

PennEast “warn[ed] that [the Court’s] holding today will give States unconstrained veto power over interstate pipelines, causing the industry and interstate gas pipelines to grind to a halt – the precise outcome Congress sought to avoid in enacting the NGA.” Slip op. at 33.   The Court then expressly suggested a “work around” requiring assistance from the United States’ Attorney’s office. I’m not sure the U.S. attorney will answer the call, nor am I sure that the pipeline company wants to cede its “federal taking” power to that office.

I’m sure the fight’s far from over, but PennEast is in its corner with a towel around its head looking deep into the water bucket….

For a more in depth review of the Court’s opinion, check the blog from our our Owners’ Counsel colleague, Robert Thomas’ here. Reuters feed here.