Read on S&P Platts
By Maya Weber and Corey Paul
New York — The US Supreme Court agreed Feb. 3 to hear an appeal by PennEast Pipeline of a federal appeals court decision that blocked the natural gas pipeline developer from seizing state lands in New Jersey.
The Supreme Court said it would hear arguments in April. The court directed the parties to address whether the appeals court properly exercised jurisdiction over the case.
Energy policy research firm ClearView Energy Partners expected a decision by the end of June.
The case involved a September 2019 decision by the US Court of Appeals for the 3rd Circuit that threw into question the route of the 116-mile PennEast pipeline project and compounded the uncertainties facing interstate natural gas pipeline developers. The high court acted after the US, under the administration of former President Donald Trump, had weighed in to argue that the 3rd Circuit ruling threatened to significantly disrupt the Federal Energy Regulatory Commission's ability to administer the nation's gas supply (PennEast Pipeline Co. LLC v. New Jersey, 19-1039).
Tony Cox, chair of PennEast's Board of Managers, said in a statement that the Supreme Court's decision to hear the appeal "is a major step forward in upholding Congress' clear charge to the Federal Energy Regulatory Commission to ensure the availability of affordable domestic energy, delivered safely and reliably via natural gas infrastructure."
The 1.1-Bcf/d PennEast project would link Marcellus Shale dry gas production in Pennsylvania with markets in Pennsylvania, New Jersey and New York. It has faced multiple permitting hurdles in New Jersey.
The 3rd Circuit case centered on PennEast's efforts to condemn about 40 properties on the route that are owned at least in part by the state of New Jersey. Some of the properties were preserved for conservation, recreation or agriculture. The appeals court ruling found that nothing in the Natural Gas Act suggests that Congress intended to delegate to private companies the federal government's exemption from state sovereign immunity that would allow the companies to bring states into federal court for condemnation proceedings.
"We remain hopeful that after hearing full arguments this term, the U.S. Supreme Court will agree that the Third Circuit's decision was profoundly wrong," Cox said.
NJ attorney general says confident state to prevail
New Jersey Attorney General Gurbir Grewal Feb. 3 criticized the court's decision to consider PennEast's appeal.
"A private party like PennEast has no right to condemn state lands in court and we look forward to pressing our arguments to SCOTUS," Grewal said in a Tweet. "When the court reviews the merits of this case, we believe they will recognize what the third circuit did: that New Jersey must prevail."
Gas trade groups had chimed in to support the appeal, but New Jersey argued that the warnings about industrywide harms were overblown. The state said the pipeline faces other legal obstacles, such as an outstanding Clean Water Act certification from New Jersey. And the state contended that impacts of the 3rd Circuit ruling may be diminished because PennEast has reconceived the project to be built in phases, including a first phase in Pennsylvania.
Gary Kruse of Arbo (fka LawIQ), a firm that analyzes the legal and regulatory aspects of the energy industry, did not expect PennEast to win on the merits at the Supreme Court because of an expected lack of support among conservative judges, but a decision could still be helpful to the pipeline industry.
"The fact that the court ordered argument on the jurisdictional question raised by the Solicitor General lessens the risk to the industry, because the court could coalesce around that question and reverse the 3rd Circuit decision without reaching the merits," Kruse said in an email to S&P Global Platts.
The case still holds risk for the pipeline industry if PennEast loses on the merits, Kruse said. "Every state would then be expected by the [environmental groups and other non-governmental organizations] and other landowners to contest any project that crosses state lands in an attempt to kill it. Alternatively, you would need to snake a route through a state to avoid all state lands, which would not be easy."
Amy Andryszak, president and CEO of the Interstate Natural Gas Association of America, welcomed the Supreme Court's decision in a Feb. 3 email.
"As INGAA made clear in our amicus brief, if this case is left to stand it would upend 80 years of precedent and overturn congressional intent," Andryszak said. "We believe the arguments put forward by PennEast are sound and will prevail following oral arguments later this year."
PennEast has planned to put the first phase of the project in service in 2022 and the second phase in service in 2024.