Another Rebuff for PennEast: Court Halts Bid to Seize State Lands

Federal appeals court reverses lower court’s decision that allowed company to exercise eminent domain over properties along pipeline route

In another legal setback for the PennEast pipeline, the United States Court of Appeals for the Third Circuit has blocked the company’s bid to condemn state-owned lands to build its hotly contested 120-mile project.

The ruling by the federal court reverses an earlier decision by a district court that allowed PennEast to exercise eminent domain to condemn 131 properties, including over 40 owned by the state that had been previously preserved for agricultural, recreational or conservation purposes.

The properties are along the route in Hunterdon and Mercer counties where the pipeline would run. It is unclear whether the company could continue the project without rerouting the pipeline without those properties.

The Third Circuit agreed with arguments made by the New Jersey attorney general that a private company lacked legal authority to seize or condemn state lands in federal court under the 11th Amendment of the U.S. Constitution. Under the legal doctrine of sovereign immunity, a state cannot be sued by a private company without its consent.

While opponents of the project hailed the decision as a victory, it most likely means the much-litigated project will face new delays in what has been a five-year quest by PennEast to build a $1 billion pipeline that would move cheap natural gas from Pennsylvania into New Jersey and the metropolitan markets.

‘…a long way from a final win’

“I look it as a big speed bump for PennEast and the rest of the other pipeline projects pending in the state and region,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “It’s a long way from a final win.’’

Pat Kornick, a spokeswoman for the PennEast Pipeline Company, said it is committed to moving ahead with the project. “While the decision is disappointing, PennEast will review the Third Circuit’s opinion in detail and determine its next steps,’’ she said.

A court appeal is likely — given that even the Third Circuit acknowledged its ruling may disrupt how the natural gas industry operates. Cheap gas from the Marcellus Shale formation in Pennsylvania and other states has driven down natural gas prices, lowering costs for consumers who use the fuel to heat homes and manufacturers for whom the fuel is a big building block in their operations.

In its arguments, PennEast had warned the court its ruling would give states unconstrained veto power over interstate pipelines, causing the industry and interstate gas pipelines to grind to a halt. The court found otherwise.

“Our holding should not be misunderstood,’’ the court said in its 34-page decision. “Interstate gas pipelines can still proceed… We simply note there is a workaround.’’ It remanded the case back to the district court for dismissal of the claims against the state.

Murphy administration sees it as big victory

The Murphy administration called the ruling a major victory for the state and the environment. “We will not hesitate to stand up to private companies when their actions violate the law — or, in this case the U.S. Constitution,’’ said New Jersey Attorney General Gurbir Grewal.

“With the rights of states to protect their own resources under constant attack from both FERC (Federal Energy Regulatory Commission) and the Trump administration, this morning’s decision is an important recognition of states’ rights in the fight against fracked gas infrastructure,’’ said Maya van Rossum, the Delaware Riverkeeper.

Tom Gilbert, campaign director for the New Jersey Conservation Foundation, said the ruling makes clear that PennEast seriously overstepped the law in trying to condemn state-owned lands, many preserved in partnership with counties, towns and private land trusts. “It’s becoming increasingly unlikely that this project will ever be built,’’ he said.

Others were less certain. “Under certain circumstances, this may allow some states to throw up some hurdles to these projects moving forward,’’ said Paul Patterson, an energy analyst with Glenrock Associates.

For PennEast, the adverse decision is the second in less than a week. Last Thursday, the New Jersey Department of Environmental Protection found applications by the company to secure crucial water quality and flood hazard permits were deficient, posing additional delays for the project.

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