Courts Question Pipeline Builders’ Use of Eminent Domain to Take Land

A recent federal court ruling could give states more authority to oppose natural gas pipeline projects by limiting the controversial use of eminent domain—the mandatory sale of private or state-owned land for public use.

That ruling and two others involving eminent domain come amid growing opposition to pipeline projects, whose benefits to the public and risks to the environment and climate are increasingly being questioned.

As the Trump administration tries to clear the way for more fossil fuel pipeline construction, a diverse coalition of environmental advocates and landowners are gaining traction in their efforts to fight new pipeline projects by focusing on property rights.

They argue that pipeline developers should not be allowed to take land through eminent domain because the developers are private companies and the shipment of oil or gas shouldn’t be considered a public use or benefit.

“As a result of a series of important events and factors that have taken place over the last several years, you are finally starting to see courts provide a little more scrutiny and really question the public use associated with some of these pipelines,” said Alexandra Klass, an energy, environment and property law professor at the University of Minnesota.

The most significant of the recent rulings involves the question of whether a state can be forced to sell state-owned land to a private company for a proposed pipeline. 

The case involves New Jersey and the PennEast pipeline, which would transport natural gas from the Marcellus shale region of Pennsylvania.

In January 2018, the Federal Energy Regulatory Commission (FERC) determined the PennEast project would serve the public interest and approved it. New Jersey Attorney General Gurbir Grewal challenged the decision and later joined six other attorneys general in urging the commission to consider the climate impacts of new pipelines as part of the certification process.

The proposed route for the PennEast pipeline would cross two parcels of state-owned land in New Jersey. When the state refused to grant easements for the pipeline, PennEast sued to try to take the land under the power of eminent domain. 

In its lawsuit, PennEast argued that allowing New Jersey to deny the sale of state land “would leave states with unchecked veto power over interstate natural gas pipeline projects.”

A federal appeals court sided with the state, ruling on Sept. 10 that PennEast cannot force the sale of state-owned land on the grounds that private parties cannot sue states in federal court. The judges wrote that their determination applies not only to two parcels of land that the state owns outright, but also to 40 additional parcels of land where the landowner has an “easement” agreement with the state to preserve the land for recreational, conservation or agricultural use. 

The ruling could provide a powerful new tool for other states seeking to block new gas pipelines, said David Bookbinder, chief counsel for the Niskanen Center, a libertarian-leaning think tank. “If a state is opposed to a project, it’s dead.”

The eastern half of the U.S. and the Gulf Coast states have seen a pipeline building boom, fueled by hydraulic fracturing that has increased the gas supply, Klass said. In Texas, at least eight major pipelines have either been proposed or are under construction, with much of the gas destined for export.

“It’s pretty overwhelming, because there are so many projects, new projects are announced all the time,” Ethan Buckner, an Energy Campaigner with Earthworks said. “Advocates [are] arguing that is just not what eminent domain was intended for.”

Is There Really a Public Benefit?

Eminent domain allows for the taking of private land—if it is for a public use or benefit. The practice is typically limited to government entities. However, once a pipeline project is approved by FERC, the power of eminent domain is extended to the company proposing the project under rules laid out by Congress in the Natural Gas Act.

As an increasing number of pipelines are being built to carry gas to Canada or to the coasts for sale to other countries, the projects’ public benefits are being questioned.

When a federal appeals court in Washington, D.C., looked at the Nexus Gas Transmission pipeline, which would ship natural gas from Ohio to Michigan on its way to Ontario, it raised the issue of whether the project constituted a public benefit. The court did not order the already completed pipeline shut down, but it did ask FERC, which approved the project, to explain how the project constitutes a public benefit.

The court’s questioning of FERC’s approval process marks one of the first such challenges by the courts of an approval process that many view as a rubber stamp, Bookbinder said.

“They have only turned down one pipeline application in the last 10 years and they have green-lighted hundreds of them,” he said. “FERC is in the business of building pipelines.”

FERC’s response to the court and what the court makes of that response could impact pipeline projects even in parts of the country where the state favors the fossil fuel buildout.

‘Seemingly Endless Administrative Limbo’

A third ruling by a federal court earlier this summer upheld how FERC deals with challenges to the use of eminent domain in pipeline projects. One of the judges in the ruling, however, expressed strong displeasure with the commission’s process that allows for pipeline construction to begin while the process of addressing challenges from private landowners drags on.

“The Commission can keep homeowners in seemingly endless administrative limbo while energy companies plow ahead seizing land and constructing the very pipeline that the procedurally handcuffed homeowners seek to stop,” U.S. Court of Appeals for the District of Columbia Circuit judge Ann Millett wrote in the Aug. 2 ruling.

“In cases involving private property rights, the Commission has transformed this court’s decisions … into a bureaucratic purgatory that only Dante could love,” she wrote.

Challenging Keystone XL’s Builder

The Trump Administration has been working to fast-track fossil fuel projects by rolling back or seeking to curtail federal environmental regulations including the National Environmental Policy Act, Endangered Species Act rules and the Clean Water Act.

“All of these efforts are really to limit the opportunities for a public debate around these really significant projects with significant impacts to the communities that they go through,” Anthony Swift, a program director with the Natural Resources Defense Council, said.

At the same time, ruptures of oil and gas pipelines and the public’s growing understanding of the role fossil fuels play in global warming have eroded public perception that building more pipelines benefits the public, Swift said.

The recent rulings do not apply to oil pipelines, which are regulated by state rather than federal agencies, however opponents of crude oil pipelines are also fighting eminent domain. In recent weeks, TC Energy, the Canadian company formerly known as TransCanada that is behind the Keystone XL pipeline, has filed lawsuits against dozens of landowners in Nebraska who have refused to sell their land to the company. 

The environmental advocacy group Bold Nebraska intends to fight the Keystone XL lawsuits on the grounds that there is no public benefit when a foreign corporation invokes eminent domain to build a pipeline, Bold Nebraska founder Jane Kleeb said.  

“I’ve always believed ever since we started fighting KXL, that the way that we stop the buildout of pipelines is that we end eminent domain for private gain,” Kleeb said. “It is the one concrete tool that we have that not only builds a strong alliance across all the different people that are impacted by these pipelines, but that has a very strong legal grounding.”

State Land in New York and Oregon

The PennEast ruling could provide a powerful new tool for New York state in its opposition to the Constitution pipeline, Bookbinder said.

States would only be able to block projects that pass through state land, but depending on how “state land” is defined, the ruling could include easement agreements private landowners have with the state to not develop the land,  or any state highways or navigable waterway, he said.

While eminent domain rules vary from state to state, the PennEast ruling might also give Oregon a new legal avenue in its longstanding opposition to the Pacific Connector Gas Pipeline and Jordan Cove gas export terminal in southwest Oregon, Bookbinder said.

“We sent the decision to the Oregon attorney general and the Oregon Department of State Lands, saying, ‘If you guys don’t want to give them easements, you are standing on very good legal ground,’” he said.