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These [Pipe]Lines, They Are A Changin’

For the loser now will be later to win
For the times, they are a-changin'
In the decade since my firm began representing landowners in challenges to FERC pipelines, victories have been few and far between and largely focused on environmental concerns.  In 2014, the D.C. Circuit found that FERC violated the National Environmental Policy Act by unlawfully segmenting review of a pipeline to minimize the impacts - but appeals courts have rejected every segmentation challenge since.  Three years later, Sierra Club snagged a remand from the D.C. Circuit for failing to consider the indirect downstream emissions from a pipeline  - a seeming no-brainer. Yet, when FERC refused to follow the D.C. Circuit mandate, the court punted in Birckhead v. FERC  issued in June 2019 - which has only emboldened FERC to ignore climate change entirely in recent orders .

But as the decade winds down, pipeline challenges have gained traction on matters of constitutional concern. As in Fifth Amendment protected property interests.  Due process. And states’ sovereign immunity in federal court.   Here’s a quick summary of the trio of federal appellate cases that represent a win for landowners and a step towards forcing meaningful and robust review of privately proposed pipelines:

1.  City of Oberlin, OH v. FERC .  To support its statutory finding of need under Section 7 of the Natural Gas Act  for a marginally (59 percent) subscribed interstate gas pipeline that would carry gas to Canada, FERC relied on precedent agreements to export gas across the border. Trouble is, the Natural Gas Act does not authorize use of eminent domain for foreign commerce - so by relying on export as proof of need for interstate pipelines which can use eminent domain, FERC would do indirectly that which it could not accomplish directly. As the oral argument bore out, the court harbored significant concerns about landowners whose constitutionally protected property rights were adversely impacted by FERC’s practices. Ultimate, the D.C. Circuit remanded the case to FERC to explain “its authority to rely in Section 7 certification proceedings on precedent agreements with foreign shippers serving foreign as well as domestic customers.” 

Incidentally, City of Oberlin is significant to property owners for another reason in that it reaffirms that “that a landowner is injured in fact when she is put to the choice of having to either reach an agreement with a pipeline seeking to access her property or have her property condemned.” Thus, whether property is ultimately acquired by eminent domain prior to resolution of an appeal will not deprive a landowner of standing to bring a challenge.

2. In re: PENNEAST PIPELINE COMPANY, LLC STATE OF NEW JERSEY et. al.. The state of New Jersey owns 42 parcels of property necessary for PennEast to construct and operate its pipeline. When the state refused to negotiate conveyance of its property, PennEast hauled the state into court to take the parcels by eminent domain. The state opposed, arguing that the Eleventh Amendment protected it from an eminent domain action by a private pipeline in federal court.  The federal district court rejected New Jersey’s argument, but the Third Circuit reversed.  The Third Circuit ruled that the federal government cannot delegate to private parties its exemption from state sovereign immunity.

What’s more important is that the Court acknowledged that its ruling could potentially “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.” But ultimately, constitutional imperatives triumphed over expediency for private developers.  And with no apparent convenient workaround, PennEast last month announced plans to seek certiorari review of the Third Circuit decision before the United States Supreme Court.

3. Allegheny Defense Project v. FERC. Landowners argued that the Commission’s practice of issuing tolling orders to circumvent the statutory 30-day period for resolving rehearing requests under the Natural Gas Act prevented landowners from seeking review of the certificate order prior to commencement of construction in violation of their due process rights. The majority, comprised of Judges Tatel and Garland summarily disposed of the Landowners’ claims finding that FERC’s action comported with precedent.  However, Judge Millett authored a scathing concurrence taking FERC to task for twisting court precedent into a Kafkaesque regime where pipelines could move forward pending final review of a certificate order, while landowners are consigned to stand by and witness destruction of their land without having had a day in court. Millett emphasized that her concern is “about fair process and, in particular, the ability of those who are directly injured—the individuals whose property is taken in whole or in part by Commission order—to have their day in court before it is too late.” Unfortunately, Millett concluded that her hands were tied by the D.C. Circuit’s precedent blessing FERC’s use of tolling orders, so she reluctantly concurred with the outcome. Undeterred, the Landowners sought en banc review which was granted on December 6, 2019 no doubt in reaction to Millett’s fiery concurrence. A full panel will hear oral argument on March 31, 2020.

So what do these three cases share in common?

For starters, all three rulings were uncharacteristically based not on statutory grounds, or the garden variety “arbitrary and capricious” standard of review, but instead, on consideration of constitutional imperatives. In City of Oberlin, FERC must explain how its reliance on exports to justify an interstate pipeline comports with the Takings Clause of the Constitution; in Penn East, the Third Circuit invoked the Eleventh Amendment sovereign immunity clause to protect state lands from an eminent domain proceeding by a private company in federal court and in Allegheny Defense, timeless due process principles of fairness prevailed. 

Second, the rulings show that Landowners and property rights matter. All three cases involved directly impacted parties - a municipality, a state and two individual landowners — that were deprived of their property by a private pipeline wielding the power of eminent domain. True, environmental issues are important - but even NEPA violations or climate change concerns pale by comparison to the harm that flows from a private gas company's unjustified use of the government's extraordinary eminent domain powers against landowners.

Third -and most importantly, the cases taken together reflect the start of a long-awaited reversal of fortune.  Landowners, for too long on the losing end of the stick are now starting to win.  Could these times finally be a changing?
Interested in learning more about pipeline cases? Check out this summary of landowner related pipeline litigation  from 2019, and a more recent update on landowner pipeline cases  from October 2019. 

My firm handles pipeline matters - including regulatory challenges, certificate enforcement and eminent domain cases before FERC, federal district courts across the country and federal courts of appeal. If you have questions about the firm’s work, please contact me directly at carolyn@carolynelefant.com
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