State-owned land can be condemned by a private company

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The United States Supreme Court has shocked many observers with its recent decision in PennEast Pipeline Co. vs. New Jersey holding that sovereign immunity does not prevent state-owned land from being condemned by a private company in a federal lawsuit.

In Penn East Pipeline, the Federal Energy Regulatory Commission (“FERC”) has granted the applicant, PennEast Pipeline Co., a Certificate of Public Convenience and Necessity authorizing the construction of a 116-mile pipeline between Pennsylvania and New Jersey. PennEast then sought to condemn tracts of land owned by the state of New Jersey under the Natural Gas Act, which allows eminent domain to be exercised by FERC certificate holders. New Jersey decided to dismiss PennEast’s claims on the basis of sovereign immunity, which prevents states from being sued in federal court without their consent.

The district court denied New Jersey’s motion and granted PennEast’s requests for a sentencing order. The Third Circuit Court of Appeals reversed the district court’s order, finding that PennEast was not permitted to condemn the New Jersey property because Section 717f(h) of the Natural Gas Act does not did not clearly delegate to certificate holders the ability of the federal government to prosecute non-consenting states.

In a 5-4 decision, the U.S. Supreme Court reversed the Court of Appeals, holding that Section 717f(h) of the Natural Gas Act allows FERC certificate holders to convict all the necessary rights of way, whether owned by private parties or States. .

In reaching its decision, the Supreme Court held that Section 717f(h) is consistent with the long history of the federal government in exercising its prominent domain authority to connect the country by toll highways, bridges and railways, and more recently by pipelines, telecommunications infrastructure, and power transmission facilities. The Supreme Court also noted that it upheld these exercises of the federal eminent domain power regardless of whether:

  1. It was exercised directly by the government or by a private corporation to which the power had been delegated;

  2. This was through an immediate takeover or condemnation action; and or

  3. It was against private property or state lands.

The Supreme Court rejected New Jersey’s position that sovereign immunity bars convicting actions against an unwilling state. While recognizing that immunity from prosecution is a fundamental aspect of state sovereignty, the Court also noted that a state can still be sued when Congress has clearly abrogated state immunity. under the Fourteenth Amendment to the United States Constitution, and when a state has implicitly accepted the suit in the Constitution. The Court then held that both of these exceptions to sovereign immunity applied, determining that:

  1. § 717f(h) of the Natural Gas Act categorically delegates to FERC certificate holders the authority to block any necessary right-of-way, including on state-owned land; and

  2. States implicitly consented to private conviction suits when they ratified the Constitution, even though there was no historical precedent supporting what PennEast was trying to do.

In an interesting twist, after winning the Supreme Court’s favorable ruling, PennEast announced that it was canceling the project. In a letter responding to a FERC request for a status update, PennEast said difficulties obtaining the necessary environmental permits for the New Jersey portion of the project caused the company to abandon its plan. pipeline development. Despite the cancellation of the project that gave rise to the case, the PennEasThis decision represents a significant victory for the gas pipeline industry, which no longer has to worry about crossing state-owned land when planning interstate gas pipeline projects.


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