On June 29, 2021, the Supreme Court of the United States ruled that a certificate of public convenience and necessity issued by FERC under section 7 of the Natural Gas Act (“NGA”) authorizes a private company to exercise eminent domain to condemn state-owned property.  In particular, the opinion holds that states cannot claim sovereign immunity from condemnation lawsuits filed by certificated pipelines against the state in order to take public land to construct, own, and operate an interstate gas pipeline project.    

FERC approved the PennEast Pipeline Company, LLC (“PennEast”) pipeline in 2018 (see January 29, 2018 edition of the WER).  Under the NGA, a pipeline company that has been issued a certificate of public convenience and necessity by FERC is delegated, by statute, eminent domain authority to acquire property for the project if it cannot reach agreement with the landowner.  Once PennEast began exercising that right in federal district court, however, New Jersey challenged PennEast’s authority to condemn land owned by the state.  New Jersey, which had property interests in many of the parcels of the land PennEast sought to condemn, argued that sovereign immunity should prohibit any such condemnation proceedings.  In 2019, the United States Court of Appeals for the Third Circuit (“Third Circuit”) ruled that the NGA did not authorize private companies to take state property.  PennEast appealed to the Supreme Court, arguing that section 7(h) of the NGA was passed specifically to solve the problem of states impeding interstate pipeline development by withholding access to their own eminent domain procedures and that the Third Circuit’s decision would have dramatic consequences to pipeline development because without the federal eminent domain power, a certificate holder had only an illusory right to build.

The Supreme Court held in a 5-4 opinion that states surrendered their sovereign immunity to condemnations filed by private parties exercising the federal government’s power of eminent domain when they ratified the Constitution and that the federal government could delegate its power to condemn state property to private companies.  The Court explained that for as long as the eminent domain power has been exercised by the United States, it has also been delegated to private parties.  Thus, 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 Court also rejected arguments that section 7(h) of the NGA does not speak with sufficient clarity that the eminent domain authority granted to certificate pipelines includes state-owned property, instead holding that the federal government is not required to speak with “unmistakable clarity” when authorizing a private party to exercise the federal government’s eminent domain authority.

A copy of the opinion is available here.