Argument analysis

Justices contemplate the interplay of eminent domain and sovereign immunity

The Supreme Court on Wednesday heard argument in PennEast Pipeline Co. v. New Jersey. The case presents two questions : (1) whether sovereign immunity prevents PennEast from instituting eminent domain proceedings in federal court to condemn properties in which New Jersey has interests, and (2) whether the U.S. Court of Appeals for the 3rd Circuit had jurisdiction over those proceedings.

The dispute arose when PennEast obtained under the Natural Gas Act a certificate of public convenience and necessity from the Federal Energy Regulatory Commission to construct a 116-mile pipeline from northeast Pennsylvania to western New Jersey. To facilitate pipeline projects, the NGA delegates federal eminent domain power to private parties that have been issued certificates of public convenience and necessity by FERC.

Shortly after receiving the certificate, PennEast instituted condemnation proceedings in federal district court against the properties in which New Jersey held interests. New Jersey, which opposes the pipeline, contended that it was immune from the suits under the 11th Amendment. The federal district court disagreed, and New Jersey appealed to the 3rd Circuit, which reversed. It found that, while Congress could delegate the federal power of eminent domain to a private party, waiving the sovereign immunity granted to the states by the 11th Amendment was a distinctly different matter. To abrogate state sovereign immunity, the 3rd Circuit determined that Congress was required to do so expressly in the text of the statute, which the court found lacking in the NGA.

The jurisdictional question arose because the NGA establishes exclusive jurisdiction for judicial challenges to FERC’s issuance of certificates of public convenience and necessity in either the U.S. Court of Appeals for the District of Columbia Circuit or the circuit in which the certificate holder is located.

At the start of his argument on behalf of PennEast, Paul Clement quickly pointed out that there were no doubts that the federal government’s eminent domain power could be delegated, or as he framed it, private parties could be “deputized” to use the eminent domain power. Thus, Clement posited that once Congress delegated eminent domain authority, as it had done in the NGA, states had to surrender their immunity since “only one sovereign can have the ultimate authority over land when the federal and state governments assert conflicting claims.” Clement also asserted that once delegation occurs, the private party then exercises eminent domain as a “limited purpose federal actor” both in terms of the Fifth Amendment’s takings clause and the 11th Amendment. In other words, once PennEast received the certificate from FERC, it stepped into the shoes of the federal government for purposes of both eminent domain and the obligation to pay just compensation.

Clement also drew a distinction between legal proceedings initiated against a state and those instituted against property owned or controlled by the state. Here he argued that suits initiated against a state’s property interests presented few of the risks to state sovereignty that had led to the adoption of the 11th Amendment: “They allege no wrong doing, they impose no liability, and they cannot be brought without federal authorization. The whole point of [an eminent domain] proceeding is just compensation for a taking.”

While the justices mostly seemed satisfied that Congress could delegate federal eminent domain authority, several justices did voice concern about the lack of federal involvement once condemnation proceedings were initiated against a state in federal court. Justice Elena Kagan queried, for example, “Was there any supervision by the government? Was there any participation by the government? Did any lawyers for the United States approve the timing of the condemnation action?” In response, Clement noted that the process leading up to the issuance of the certificate, including the pipeline’s route, “was all done under the auspices of the federal government. They approved the route … right down to which parcels were affected.”

On behalf of the United States, Deputy Solicitor General Edwin Kneedler followed and promptly delved into the jurisdictional issue. He agreed with PennEast and New Jersey that the 3rd Circuit had jurisdiction to consider New Jersey’s sovereign immunity defense in the condemnation proceedings. However, he rejected New Jersey’s sovereign immunity claim, asserting that “there is no such 11th Amendment bar.” This was because, according to Kneedler, “the federal government’s power of eminent domain is complete in itself” and “no state can prescribe the manner in which it may be exercised.” Kneedler also asserted that “the sovereign’s right of eminent domain includes the power to authorize private entities to exercise that right.”

Kneedler then addressed lurking questions about the lack of an explicit and clear statement in the NGA that Congress was abrogating state sovereign immunity when it delegated the federal eminent domain power to private parties. He told the justices that, because “there is no immunity to abrogate to begin with,” the only “clear statement” question is “whether the statute authorizes a private party to commence the eminent domain proceeding, and here, we think it’s clear that it does.”

As he had explored with Clement, Justice Neil Gorsuch remarked that this case involved a proceeding to take land and determine compensation, and so it “would seem to be a suit in law and equity.” As such, he asked, “Why doesn’t this fall within the plain text of the 11th Amendment?” Kneedler conceded that it was a suit against a state but then offered that, nevertheless, the 11th Amendment was no bar because it was “meant to restore an immunity that had been taken away by the court, and that preexisitng immunity did not bar this sort of action by someone whom Congress had vested with eminent domain authority.”

Jeremy Feigenbaum, New Jersey’s state solicitor, began his argument by reiterating that the 11th Amendment barred PennEast’s suit. He noted that the United States could bring such a suit but that non-consensual suits by private parties “against the states are never proper.” And he further contended that “state consent to be sued by the United States was not consent to suit by those the U.S. might select,” noting that “there are important differences between lawsuits by responsible and politically accountable sovereigns and those by private parties.”

Several justices expressed concern about the impact that New Jersey’s position presented for the construction of new natural gas pipelines. After Feigenbaum confirmed that New Jersey had indeed opposed the pipeline before the D.C. Circuit, Chief Justice John Roberts responded, “Well, that seems to present a significant practical problem.” He expressed concern about a de facto state veto over new pipelines. “Your client opposes this pipeline. So if they say no to it, it doesn’t go forward,” Roberts said. He then characterized New Jersey’s position as placing the federal government in the unacceptable position of “a junior varsity sovereign.”

Justice Stephen Breyer was perhaps the most skeptical about New Jersey’s position. He went back to the development of the current system of natural gas pipelines that today crisscross the country. He remarked that there were some states that objected to the pipelines “in a whole variety of complex ways. And so Congress passed he Natural Gas Act.” He further noted that absent the eminent domain power conferred by the NGA, “How could they have done it? I don’t see it.” And he later remarked, “I don’t understand how any reasonable person would have delegated any eminent domain power to the Natural Gas Act, which was for interstate pipelines, without including the power to proceed against the state.”

Feigenbaum responded by contending that the premise of Breyer’s question “relies on the misconception that’s at the heart of PennEast’s brief, and that’s speculation about the way states behave.” Breyer was quick to sharply respond, “I know that natural gas is a subject of a big argument politically in a lot of states, some thinking it’s great for the environment and others thinking it doesn’t go far enough, it has risks. Those are the two things I know. Not speculation.”

While the court could determine that the 3rd Circuit lacked jurisdiction, the justices seemed more interested in the interplay of the NGA and the 11th Amendment than they did in the jurisdiction question. Thus it is likely that the court will reach a decision on the merits.

The practical concerns expressed by several of the justices in reaction to New Jersey’s claim of sovereign immunity may bode well for PennEast, since it also argued in its brief and before the court that, if the 3rd Circuit’s ruling stands, states will have veto power over interstate natural gas pipelines that would have been authorized by the federal government. Gorsuch and Justice Amy Coney Barrett, however, appeared the most concerned about a private party haling a state into federal court, so it remains to be seen who will ultimately prevail.