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Power & Pipes

FERC, CFTC, and State Energy Law Developments

A declaratory order issued by the Federal Energy Regulatory Commission (the Commission) on January 30 in Docket No. RP20-41-000 grants pipeline developers greater certainty in planning and siting construction. The order was issued after a split 2-1 vote. It may also significantly reduce pipeline developers’ expenses by avoiding costly disputes with states over the possession of state-owned land. The order resulted from a petition filed by a company (Pipeline) seeking to construct an approximately 116-mile greenfield natural gas pipeline designed to provide firm natural gas transportation service from receipt points in the eastern Marcellus Shale region, in Luzerne County, Pennsylvania, to delivery points in New Jersey and Pennsylvania (the Project). The petition requested the Commission’s interpretation of the scope of the eminent domain authority in Section 7(h) of the Natural Gas Act (NGA).

Emphasizing its exclusive jurisdiction over the transportation and sale of natural gas in interstate commerce for resale, the Commission stated state and local agencies may not prohibit or unreasonably delay the construction or operation of facilities approved by the Commission. The Commission found that NGA Section 7(h) empowers natural gas companies, and not the Commission, to exercise eminent domain and that this authority applies to lands in which states hold interest. The Commission stated that this was the intent of Congress. Therefore, under the order Pipeline may condemn state-owned land for the Project as a holder of a certificate of public convenience and necessity, issued in Docket No. CP15-558-000, with the power of eminent domain.

Pipeline filed the application after the US Court of Appeals for the Third Circuit held on September 10, 2019, that Pipeline could not take the possession of New Jersey state-owned land for the Project. The Court found that the NGA does not overcome New Jersey’s sovereign immunity from condemnation suit stemming from the 11th Amendment, overturning a lower court ruling, which allowed Pipeline to seize land. According to the court, there is no indication that Congress intended to delegate the federal government’s exemption from state sovereign immunity to private gas companies. Relying upon the order, Pipeline may file a petition for writ of certiorari in the US Supreme Court and challenge the Third Circuit’s ruling.

Dissenting, Commissioner Richard Glick stated it was uncertain whether Congress intended NGA Section 7(h) to apply to state lands because the relevant evidence is inconclusive. He further stated that rather than the Commission weighing in on the issuing, Congress could have the last say by amending NGA Section 7(h) to facilitate pipeline developers’ efforts to acquire rights-of-way over state land.