U.S. Supreme Court Rules States are Not Immune to Private Condemnation Suits

In a recent 5-4 decision, the United States Supreme Court held that the federal government may delegate its power to take state land through eminent domain to private companies. PennEast Pipeline Co. v. New Jersey, No. 19-1039, 2021 U.S. LEXIS 3564, at *39-40 (June 29, 2021). Long before PennEast Pipeline Co., the Supreme Court had determined that the federal government can 1) condemn state land through its eminent domain power, 2) delegate its eminent domain power to a private company for the construction of public resources, and 3) sue nonconsenting states to take possession of their land. One lingering legal question remained, however: does a private company’s delegated eminent domain power include the ability to sue a nonconsenting state—a state that refuses to let the company use the land for the desired purpose—to take possession of the land? PennEast Pipeline Co. answered yes.

In 2018, PennEast sued New Jersey in a federal district court. PennEast sought to obtain rights-of-way along its 116-mile pipeline route from Pennsylvania to New Jersey. New Jersey filed a motion to dismiss, arguing sovereign immunity protects it from being sued. The district court disagreed and dismissed New Jersey’s motion. It found that PennEast’s delegated eminent domain power under the Natural Gas Act (NGA) includes the authority to sue New Jersey to condemn its property. New Jersey appealed the ruling to the Third Circuit Court of Appeals, which reversed the district court ruling and ordered the case dismissed. The appellate court concluded that while the NGA delegates eminent domain powers to private companies, it does not delegate to private companies the authority to initiate condemnation proceedings against states. In other words, the NGA does not nullify New Jersey’s sovereign immunity. PennEast appealed the ruling to the U.S. Supreme Court.

On PennEast’s appeal to the Supreme Court, New Jersey defended the Third Circuit ruling. New Jersey argued that the NGA does not speak with specificity regarding the scope of a private company’s delegated eminent domain power, and therefore cannot overcome a state’s sovereign immunity. Five Justices joined in rejecting New Jersey’s argument. The majority opinion, authored by Chief Justice Roberts, reasoned that there is no requirement that the federal government speak with unmistakable clarity when it delegates an exemption to sovereign immunity. Additionally, the majority found the power of eminent domain inextricably linked to condemnation authority; if a company with eminent domain authority does not also possess the ability to seize land, the federal government would be subject to the will of the states—an unacceptable outcome.

The four dissenting Justices criticized the majority’s lack of legal or historical basis for its decision and disputed the majority’s claim that private condemnation authority is necessary to prevent states from infringing on federal sovereignty. The Federal Energy Regulatory Commission (FERC), the agency that issues certificates of convenience for pipelines, could condemn state land then transfer the property interests to PennEast, all without diminishing the federal government’s control. Relying on the constitutional scheme, which gives broad eminent domain power to the federal government, the majority rejected the dissent’s roundabout suggestion. The majority bolstered its reasoning with an intuitive appeal: “‘Just as permission to harvest the wheat on one’s land implies permission to enter on the land for that purpose,’ so too does authorization to take property interests imply a means through which those interests can be peaceably transferred.” Id. at *34 (quoting the late Justice Antonin Scalia).

Accordingly, the Supreme Court held that eminent domain power delegated to a private company includes the ability to sue states to condemn property. As a result, the Court reversed the Third Circuit’s contrary judgment and remanded the case to the district court for PennEast’s condemnation suit against New Jersey to play out. Though PennEast still faces other administrative hurdles before laying pipes in the ground, this small victory removes one obstacle in the way of its path to pipeline construction. Moving forward, as states transition toward renewable energy, private pipeline companies may more frequently explore this legal corridor to build on resistant states’ land.