March 2021, Vol. 248, No. 3

Editor's Notebook

PennEast’s Hail Mary Legal Challenge

By Michael Reed, Editor-in-Chief

In what is being viewed as hopeful news from the Marcellus Shale region, the U.S. Supreme Court agreed to hear an appeal by PennEast Pipeline Company to a ruling that prevents the company from seizing land in New Jersey through eminent domain. 

The high court will likely hear the arguments in April, which means there should be a ruling by late June. If built, the 36-inch, 116-mile (914-mm, 187-km) pipeline would carry as much as 1 Bcf/d (28 MMcm/d) of natural gas from northern Pennsylvania to New Jersey.  

At issue before the Supreme Court is the power of eminent domain as laid out in a section of the U.S. Natural Gas Act, which PennEast used as the basis to sue the state and other parties for access to more than 40 parcels of land. 

While many legal experts think it unlikely that the 3rd Circuit Court’s ruling will be overturned, particularly since the property in question is largely state-owned, PennEast does raise a valid legal question, which was summed up well by company Chairman of the Board of Managers Tony Cox.  

Calling the decision to hear the case “a major step forward,” he pointed out that “Congress passed the Natural Gas Act specifically to avoid state and local vetoes of interstate projects that had been determined by federal regulators to be in the public need and benefit.”  

Cox added that, if successful in court, PennEast expects to have the first phase of the project in service before 2022 is over and bring the second phase, located in New Jersey, online in 2024. 

“This is a major step toward settling whether states can arbitrarily override settled and established federal laws that govern energy infrastructure and, more importantly, interstate commerce,” CEA President David Holt observed separately. 

Whether this latest court challenge turns out to have been wishful thinking or not, the victory serves as a shot in the arm for the industry in general and midstream in particular, coming on the heels of a temporary halt to oil and gas lease sales on federal land and the cancellation of the Keystone XL permit.  

The 3rd Circuit ruling stated that while the Gas Act provision gave companies eminent domain powers, it did not necessarily follow that states can be sued to enforce those powers. It also pointed out that the U.S. Constitution’s 11th Amendment limits the ability of private parties to sue a state, unless that state consented.

New Jersey has continued to oppose the pipeline’s construction throughout the process, and it did not consent to the seizure of properties the state owns or in which it has an interest. 

A brief filed in December by the outgoing Justice Department and Federal Energy Regulatory Commission (FERC) argues the 3rd Circuit decision “threatens to significantly disrupt” the ability to oversee U.S. natural gas supply by giving states veto power over projects on state-owned lands.  

Additionally, the brief said, “requiring all interstate natural gas pipelines to be re-routed (if possible) over exclusively private land would significantly restrict FERC’s ability to approve those projects, pose a substantial risk of increasing the costs and environmental impacts … and threaten abandonment of some projects that FERC would otherwise find to be in the public interest.”  

The short-sightedness of allowing such impediments to stand as law would serve as a major roadblock to the construction of future pipelines, particularly those that cross borders. 

Following the 3rd Circuit’s initial ruling, PennEast asked FERC for permission to build the pipeline in two stages.  

If approved, construction would begin in Pennsylvania, where the bulk of needed permits are already in place. This would allow for interconnections with Adelphia Gateway and Columbia pipelines in the east-central part of the state. 

However, if the Supreme Court does not overturn the lower court decision, a new route through New Jersey will likely be required. The other avenue would be through Congress, which seems unlikely to succeed considering its current composition.

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