From time to time, courts are called upon to review established case law to make certain the original decision was correct and is being applied properly to the facts before the court. The issue of adhering to precedent has become somewhat of a hot button with our country's political divide and views of the nine justices on U.S. Supreme Court. In New Jersey, the pending PennEast litigation, filed in the U.S. District Court for the District of New Jersey, has caused several other courts to take a closer look at the existing case law and the procedures relied upon by the natural gas industry exercising the power of eminent domain to construct natural gas pipelines. I will leave the policy decisions and effect of greenhouse gases to others, and just focus on several legal issues working their way through the courts.

Three issues being litigated in the PennEast pipeline litigation (one indirectly) that I believe are of particular interest are: (1) the State of New Jersey's appeal to the U.S. Third Circuit Court of Appeals from a decision overruling the State's Eleventh Amendment objection to federal court jurisdiction, which was decided Sept. 10, 2019; (2) the recent Petition for Writ of Certiorari filed with the United States Supreme Court seeking a review of the conflicting case law on the issue of whether district courts may issue preliminary injunctions granting immediate possession to private pipeline companies without payment of just compensation or entry of final judgment; and (3) the recent application filed by PennEast with the New Jersey Department of Environmental Protection (NJDEP) seeking review of the pipeline project under the Clean Water Act and other environmental laws. Property owners, non-profit corporations, and governmental entities believe these legal challenges may fundamentally change the landscape in natural gas pipeline litigation and provide property owners with more protection.

When the Federal Energy Regulatory Commission (FERC) issued a certificate of public convenience and necessity (FERC Certificate) to PennEast, PennEast filed over 140 eminent domain lawsuits in the U.S. District Court for the District of New Jersey, seeking to acquire the necessary property rights to build a natural gas pipeline. Under the Natural Gas Act, Congress authorized private pipeline companies to exercise the federal government's power of eminent domain once the pipeline receives the necessary approvals from FERC. The State was named as a defendant in over 40 eminent domain actions because the State of New Jersey was either an owner of the property or held an easement (most often a conservation easement restricting the use of the property) and was a necessary party to the lawsuit. The State challenged the district court's jurisdiction, arguing the Eleventh Amendment of the U.S. Constitution bars federal jurisdiction over suits by any private citizen against a state. Because PennEast is a private party, the State argued PennEast cannot proceed in federal court. The New Jersey district court overruled the objection, finding "PennEast has been vested with the federal government's eminent domain powers and stands in the shoes of the sovereign" and can sue the State of New Jersey in federal court. The State filed an appeal with the Third Circuit.

On Sept. 10, 2019, the Third Circuit reversed the district court and held that the "NGA does not constitute a delegation to private parties of the federal government's exemption from Eleventh Amendment immunity" and remanded the case back to the district court for dismissal of claims against the State. The Third Circuit also stated that:

PennEast warns that our holding today will give States unconstrained veto power over interstate pipelines, causing the industry and interstate gas pipelines to grind to a halt—the precise outcome Congress sought to avoid in enacting the NGA. We are not insensitive to those concerns and recognize that our holding may disrupt how the natural gas industry which has used the NGA to construct interstate pipelines over State-owned land for the past eighty years, operates. …

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In any event, even if the federal government needs a different statutory authorization to condemn property for pipelines, that is an issue for Congress, not a reason to disregard sovereign immunity. To be sure, such a change would alter how the natural gas industry has operated for some time. But that is what the Eleventh Amendment demands.

The Third Circuit's opinion is consistent with a recent decision from the U.S. District Court for the District of Maryland in a separate gas pipeline case (Columbia Gas Transmission v. 12 Acres of Land, Civ. No. 1:19-cv-01444), which upheld the same Eleventh Amendment argument holding that a private pipeline company cannot sue a state in federal court. The Maryland district court did not issue a written decision, but appeared to agree with the State of Maryland's argument that Congress can delegate the power of eminent domain to a private company, but cannot assign its Eleventh Amendment exemption to a private party—the two powers and rights are separate. Columbia Gas Transmission did cite the New Jersey district court decision in PennEast Pipeline as authority for its position, but the argument was rejected by the Maryland district court.

The second legal challenge pertains to the procedures used by pipeline companies to obtain immediate possession of property. Several PennEast homeowners are parties to an amicus filing in a case originating in West Virginia (before the Fourth Circuit) asking the U.S. Supreme Court to decide whether district courts are empowered to enter preliminary injunctions giving private companies immediate possession of land before final judgment in Natural Gas Act condemnations. Congress does have the power to authorize a "quick take" under certain laws, and has done so in the past, but did not provide for quick-take rights in the Natural Gas Act. Under a quick-take scenario, the government files a declaration of taking and deposits the pre-litigation offer of just compensation into court. Once that is accomplished, title to the real property vests in the government and the right to just compensation for the land vests in the persons entitled to the compensation. Since there is no quick-take option under the Natural Gas Act, pipeline companies looking to move quickly have relied upon Rule 65 of the Federal Rules and requested a preliminary injunction allowing them to take possession of property before paying just compensation, relief that is tantamount to a quick-take. If the injunction is granted, the pipeline company is not required to deposit any money into court or irrevocably commit to paying just compensation. Rather, the pipeline company retains the right to decline to pay whatever amount of compensation the court determines is just and walk away from the taking. Sound more like an option to purchase?

The use of a preliminary injunction to take possessory rights deprives property owners of substantive and procedural due process protections. If a pipeline company wants to take real property, it should be required to obtain a final judgment and pay just compensation before being entitled to take possession of private property, not rely on overly broad preliminary injunctions. If the U.S. Supreme Court decides to take the case and review the law, the procedural landscape for eminent domain cases under the Natural Gas Act could change.

One last important issue arises from the recent filing of PennEast's Multi-Permit Application for Freshwater Wetlands Individual Permit, Special Activity Transition Area Waiver, Letter of Interpretation, Water Quality Certificate, Flood Hazard Area Individual Permit, Flood Hazard Hardship Exception Request, and Flood Hazard Area Verification ("NJDEP Application"). Although PennEast received its FERC Certificate from a federal regulatory board that many believe is friendly to all pipeline projects, PennEast must now get certain approvals and permits from NJDEP. The approvals from NJDEP may be difficult to obtain given that the pipeline route goes through many environmentally sensitive areas, crosses many preserved and protected farms, traverses protected streams and invades the habitat of several protected wildlife species, and potential discharges from the construction and operation of the pipeline may not meet New Jersey's established water quality standards. It is important to remember that PennEast selected this route and chose to disregard the unique environmental characteristics of this part of New Jersey, a decision that may come back to haunt it.

Historically, natural gas pipeline companies have been successful relying upon the existing playbook and citing the same old cases. With an aggressive defense and numerous parties challenging the status quo, the courts seem open to revisiting the existing case law to determine whether all constitutional protections are being provided to private and public entities. The U.S. Constitution cannot be ignored solely for the benefit of private natural gas companies.

Timothy P. Duggan is a shareholder of Stark & Stark in Princeton and chair of the firm's Eminent Domain and Real Estate Tax Appeal Groups. He represents individuals and businesses in negotiating and challenging eminent domain.