Delegation of Eminent Domain Powers to Private Entities: In Re PennEast Pipeline Co.

by Bernard Bell — Monday, Sept. 16, 2019

Summary:  Does the federal government’s delegation of its power to take property by eminent domain to private entities allow such entities to bring a federal or state action to acquire state-owned property (despite states’ “Eleventh Amendment” immunity?

The Natural Gas Act (“NGA”), 15 U.S.C. §§ 717–717z, allows private gas companies to exercise the federal government’s power to take property by eminent domain, 15 U.S.C. §717f(h).  In particular, when any “holder of a certificate of public convenience and necessity” cannot acquire property needed for the approved gas line or related facilities by contract, “it may acquire the same by the exercise of the right of eminent domain” in the appropriate federal district court or in the state courts. The statute also provides that the “practice and procedure” in any federal court proceeding “shall conform as nearly as possible” with “the practice and procedure” in the state the property is situated.  Natural gas companies have possessed such delegated power to exercise the federal government’s eminent domain power since 1947.  Public Law 245, 61 Stat. 459 (July 25, 1947)(amending 7 U.S.C. §717f).

In In re PennEast Pipeline Company, LLC, — F.3d — (September 10, 2019), the Third Circuit held that section §717f(h) conferred the federal government’s eminent domain powers, even with regard to state interests in real property, but not the power to file a declaration of taking, accompanied by payment of the estimated “just compensation,” in federal or state court to accomplish the taking.  In the panel’s view, Congress’ power of eminent domain vis-à-vis the state, consisted of two distinct and divisible powers: the power to appropriate property and the power to sue states despite their Eleventh Amendment immunity.[1]  Indeed, the Court doubted whether the federal government could delegate its exemption from constitutional sovereign immunity to a private entity.  Because of the Court’s reliance on Eleventh Amendment immunity, its decision leaves much property held by counties, municipalities, and interstate compact agencies subject to taking by natural gas companies.  Such entities are not necessarily cloaked in Eleventh Amendment immunity.  See, Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 401 (1979)(county and municipal government); Moor v. County of Alameda, 411 U.S. 693 (1973)(county and municipal government); Hess v Port Authority Trans-Hudson Corporation, 513 U.S. 30 (1994)(compact agencies do not necessarily possess Eleventh Amendment immunity).

PennEast Pipeline could have been resolved in at least three ways.  First, the Court could have interpreted section 717f(h) to mean that Congress has conferred the power of eminent domain, both the power to appropriate property and to sue to effect the appropriation, only with respect to private landowners, but not state governments.  Second, the Court could have interpreted section 717f(h) to mean that Congress has conferred both components of the federal government’s power of eminent domain against all property owners, without distinguishing governmental and private property owners.  Or, third, the Court could be interpreted section 717f(h) as it did — gas companies have the power to appropriate property regardless of the governmental or non-governmental status of the property owner, but possess the power to effectuate such an taking only with respect to other private entities.   This third conclusion seems the oddest.

Eminent Domain as an Inherent Power of All Governments

The power of eminent domain has a long pedigree, having its origins in ancient Greece and Rome.  See, Bernard W. Bell, Legislatively Revising Kelo v. City of New London, 32 J. LEG. 165, 205-06 (2006)(citing 1 NICHOLS ON EMINENT DOMAIN § 1.12[1] (Julius L. Sackman ed., 3d ed. 2002), which referenced Tacitus’ Annals).  The term “eminent domain” derives from the Latin phrase “dominium eminens,” and has been attributed to Seventeenth Century Dutch jurist Hugo Grotius. See, id.  The power was well-established in England at the founding of the colonies, and colonial governments invoked it frequently.  See, id.  In colonial practice, eminent domain was sometimes used for private purposes, such as creating private ways or mills. See, id. “By the time of the American Revolution, . . . the obligation to make compensation had become a necessary incident to the exercise of the [eminent domain] power.” See, id. (citing 1 NICHOLS ON EMINENT DOMAIN,  §§ 1.13[2], 1.21[5], which referenced Blackstone’s Commentaries).

The U.S. Supreme Court, has long considered the power of eminent domain an inherent and essential attribute of sovereignty. Id.  It first recognized the federal government’s eminent domain powers in Kohl v. United States, 91 U.S. 367 (1875).[2] The Supreme Court has asserted that “the taking of private property for public use upon just compensation is so often necessary for the proper performance of governmental functions that the power is deemed to be essential to the life of the state.” Legislatively Revising Kelo, at 205 (quoting Georgia v. City of Chattanooga, 264 U.S. 472, 480 (1924)).[3] Thus, the power to invoke eminent domain requires no explicit recognition in the jurisdiction’s constitution, existing in absolute and unlimited form at the sovereign’s inception. Indeed, federal constitutional provisions relating to eminent domain, such as the Fifth Amendment’s “Just Compensation” Clause, neither directly nor impliedly grant the power of eminent domain, but simply serve to limit a power that exists independently without any limitations.  Id.[4]  The power of eminent domain “extends to all property within the jurisdiction of the [jurisdiction].”  Id. (quoting Georgia v. City of Chattanooga). The power “cannot be surrendered”; even a sovereign that has attempted to contract it away, may resume the exercise of the power “at will.” Id. (quoting Georgia v. City of Chattanooga).[5]

Typically a taking is accomplished by a declaration of taking.  The proceeding thus commenced allows the landowner to contest the government’s valuation of the property.  But government entities also engage in taking by regulation or by invading a land owner’s property rights, in which case the property owner must bring an inverse condemnation suit seeking just compensation.[6]

Delegating Eminent Domain Powers

There are certainly reasons for concern in allowing delegation to private entities of the potent inherent governmental power to coerce property owners to relinquish their rights.  The power of eminent domain should be used for “public purposes,” not private aggrandizement.  In Calder v. Bull, 3 U.S. 386, 388 (1798), Justice Samuel Chase wrote, in his debate with Justice James Iredell over the role of natural law in constitutional interpretation, that “a law that takes property from A, and gives it to B” is “contrary to the great principles of the social compact.”    Private entities’ use of land can, of course, serve as a “public use” of property.  The U.S. Supreme Court explicitly recognized that proposition in Kelo v. City of New London, 545 U.S. 469, 485-86 & nn. 14, 16 (2005), and eminent domain has long been used to acquire land for facilities to be used by common carriers, such as railroads, see, id. at 477; id. at 512 (Thomas, J., dissenting).  But even when public officials invoke eminent domain for land that will be used be a private actor, concern about whether the action is motivated by public purposes or private aggrandizement is substantial.  Much of the concern over the recognition that economic development takings could serve as a “public purpose” related to a concern that even government entities have been unduly solicitous of private entities parochial interests in acquiring property whose acquisition the government would facilitate by eminent domain.  See, Legislatively Revising Kelo, at 172-75, 189.  Delegating eminent domain powers to private entities, increased the risk that the decision to invoke that power will be predominantly influenced by that private entities’ purposes.  And, theoretically at least, there would be no “political accountability” for the invocation of the eminent domain power in such circumstances.  Asmara Tekle Johnson, Privatizing Eminent Domain: The Delegation Of A Very Public Power To Private, Non-Profit And Charitable Corporations, 56 Am. U. L. Rev. 455, 471 (2007).[7]

Of course, PennEast’s taking was not wholly immune from political accountability.  It could engage in takings only after it was granted a certificate of convenience by FERC.  PennEast Pipeline at *1-*2.[8] This may be a more politically accountable process than the standard process associated with government taking, which can be initiated by “any officer of the Federal Government authorized to acquire real estate for the erection of a public building or for other public uses.”  40 U.S.C. § 3113.  Granted, the filing of a declaration of taking and control of the subsequent litigation rests in the hands of the Department of Justice.  Despite section 3113’s mandatory language, i.e., “the Attorney General, on application of the officer, shall have condemnation proceedings begun within 30 days from receipt of the application at the Department of Justice,” presumably the Attorney General has some discretion to decide whether to proceed.[9]

Moreover, a government’s power to delegate its power of eminent domain, and more particularly the federal government’s power to delegate its eminent domain powers, has been long established.  See, Luxton v. North River Bridge Company, 153 U.S. 525 (1894)(federal government); 2 PATRICIA E. SALKIN, AMERICAN LAW OF ZONING § 17:2 (5th ed.)(available on westlaw)(federal and state governments); JULIAN CONRAD JUERGENSMEYER, ET AL., LAND USE PLANNING AND DEVELOPMENT REGULATION LAW § 16:8 (3d ed.)(available on westlaw)(state governments).  Holding that the government lacks authority to delegate its powers would thus be a radical change in the law.

However, given the potential for abuse and the inherently governmental nature of eminent domain, perhaps a clear statement requirement should be imposed with respect to the delegation of eminent domain powers to private entities.  In the case of private natural gas companies, though, Congress’ delegation of the federal government’s eminent domain powers could not be clearer.

Does the General Delegation of Eminent Domain Power Include Taking Property of Another Sovereign?

Might there be reasons to hold that even though the federal government can exercise the eminent domain power directly over state-owned property, it cannot delegate to a private entity the power to take state-owned property?  We might compare the affront to state dignity of authorizing the taking of state property with authorizing private citizens to sue states.  It is difficult to make such comparative assessments of affronts to “state dignity” in the abstract.  Nevertheless, it is not clear that authorizing a private entity to take state-owned property dedicated to the state’s public purposes is any less of an affront than authorizing private entities to hale states into federal or state courts.  If anything, the taking of property is more peremptory than requiring states to defend themselves in judicial proceedings (particularly if the federal government can delegate its “power” to “take” property without a declaration of taking).[10]  A state government’s power to exercise dominion over its property, and indeed, its ability to compel private landowners to relinquish their property, may have as long a pedigree as the doctrine of sovereign immunity.[11]

Moreover, examined in the specific contexts of takings, the compulsory deprivation of property is surely a matter of greater concern than being haled into federal or state court.  Is the real affront in such a situation is having to participate in litigation, or being deprived of property by coercion?  Indeed, judicial proceedings following the filing of a declaration of taking essentially provide protection to the landowner, in the PennEast situation, the State of New Jersey.  Takings proceedings are a benefit to the state, not a detriment.

Indeed, state-owned property itself is presumably in public use.  It may be for public facilities or easements to protect the environment, as is the case in PennEastPennEast Pipeline at *2 & n.4.  Indeed, at least on the state level, the prior public use doctrine essentially holds that land already devoted to a public use may not be condemned for another public use absent specific legislative authority.  2 PATRICIA E. SALKIN, AMERICAN LAW OF ZONING § 17:3 (5th ed.); Joris Naiman, Judicial Balancing of Uses for Public Property: The Paramount Public Use Doctrine, 17 B.C. ENVTL. AFF. L. REV. 893, 896 (1990).  Typically, the doctrine applies when an agency to whom eminent domains powers has been delegated seeks to condemn property owned by the delegating authority.  Thus, the doctrine may well be inapplicable to natural gas company’s use of federal eminent domain power to take state property.  Nevertheless, the prior public use doctrine suggests that delegations of the eminent domain authority should be particularly clear when private entities eek to acquire property that is already in public use by a governmental entity.

Thus, if Congress possesses constitutional authority to delegate to private entities its sovereign power to take property owned by state governments, institution of a clear statement rule might well be appropriate.  There certainly appears no such clear statement in the text of section 717f(h) or the Natural Gas Act in general.  But, of course, Congress would not have known of the need to include such a statement when section 717f(h) was initially enacted in 1947.

Can Congress Delegate the Power to “Take” Property Without Delegating the Concomitant Power To Initiate a Takings Suit?

The Third Circuit’s decision in PennEast has an air of unreality.  It splits two aspects of the exercise of eminent domain that are not, as a practical matter, divisible.  It is difficult to understand why Congress would delegate the power to invoke eminent domain, but not the power to effectuate it.  It is also difficult to understand how analyzing the two powers separately serves any purpose.  The grant of the power of eminent domain inherently includes the power to sue the state by filing a declaration for taking.  Indeed, if the Third Circuit’s analysis is correct, not only could natural gas companies not commence eminent domain proceedings in federal court, they could not even commence such proceedings in the state’s own court.  Alden v. Maine, 527 U.S. 706 (1999), would prohibit Congress from allowing natural gas companies to sue states on federal claims even in state courts.

On the most practical level, the Third Circuit’s approach would arguably authorize private entities to proceed by simply taking property and imposing upon states the obligation to bring inverse condemnation suits.  A private company could be given the power to inundate state property or simply assert dominion over it, requiring the state to challenge the action or seek just compensation in federal court.  Such a course of proceeding is more unfair and inequitable to the state than a suit begun with a declaration of taking.  And it restricts the power of the state to prevent the taking in the first place.  In both respects, an private entity’s extra-judicial assertion of dominion to which the state must respond is surely more of an affront to a state than the commencement of a lawsuit with a declaration of taking.  Surely taking the state’s property and requiring it to proceed to federal court, or even state court, for relief is more offensive than simply allowing a private entity to proceed by filing a declaration of taking.  Indeed, the potential alternative course of proceeding puts the state in worse position than the private landowner.

Of course, section 717f(h) does not expressly authorize such extra-judicial conduct. And such a scenario might seem fanciful, but apparently it is not.  The Natural Gas Act does not expressly provide that property may be condemned for underground natural gas storage facilities, but precedent suggests that such use provides a permissible basis for natural gas companies to invoke eminent domain pursuant to section 717f(h).  Columbia Gas Transmission Corp. v. An Exclusive Natural Gas Storage Easement [Parrott], 776 F.2d 125, 128 (6th Cir. 1985); see, Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 295 n.1 (1988).  Subsurface rights associated with many properties overlying storage fields, even storage fields in operation for decades, have never been secured by a purchase or declaration of taking.  Steven D. McGrew, Selected Issues in Federal Condemnations for Underground Natural Gas Storage Rights: Valuation Methods, Inverse Condemnation, and Trespass, 51 CASE W. RES. L. REV. 131, 134 (2000).  At least one court has held that in such a situation a trespass claim seeking damages is preempted by federal law and thus property owners are limited to an inverse condemnation claim.  Columbia Gas Transmission Corp. v. An Exclusive Natural Gas Storage Easement [Arnholt], 747 F. Supp. 401, 402-03 (N.D. Ohio 1990).  In part, the court reasoned that federal eminent domain law does not prohibit a taking of private property. Id. at 404.  Rather, federal eminent domain law merely requires that just compensation be paid for any property taken; thus a federal inverse condemnation claim is the only appropriate remedy for an uncompensated taking.  Id.  The weight of authority may be to the contrary, see, Selected Issues, supra, at 184, but Columbia Gas [Arnholt] cannot simply be dismissed out of hand.

In any event, constitutional immunity surely should not force Congress to allow natural gas companies to invade property, deprive the owners of the rights to sue for trespass, and leave property owners solely with the option of initiating an inverse condemnation suit in federal court.  Such a course of events hardly seems respectful of states as independent sovereigns, and would be a far greater affront than anything the gas company did to the State of New Jersey in PennEast.

Conclusion

It makes little sense to disaggregate the eminent domain power into two separate components for purpose of analyzing Congress’ power to delegate authority to acquire land to private entities.  The fact that eminent domain, when done in the optimal manner, requires a private entity to commerce a lawsuit against a state could mean that the power to invoke eminent domain power to acquire state property is not delegable.  Such an approach puts inordinate focus on the commencement of a lawsuit and too little focus on the coerced taking of property; in other words, it allows the tail to wag the dog.  Courts should more sensibly conclude that recognition of a power to delegate invocation of eminent domain inherently includes empowering the private entity to bring suit in federal or state court to effectuate the exercise of that power in a fair and efficient manner.[12]

It seems likely that a petition for writ of certiorari will be filed in this case.  And given the stakes in terms of limiting power Congress granted under the Natural Gas Act and the interesting federalism questions, the Court might even be tempted to take the case.


[1] Given Eleventh Amendment immunity doctrine’s atextual breadth, it is better described as “constitutional sovereign immunity.”

[2] William Baude has characterized Kohl as a complete departure from a settled historical understanding, namely that the federal government could not exercise eminent domain within any state’s borders.  William Baude, Rethinking The Federal Eminent Domain Power, 122 YALE L.J. 1738, 1741-44 (2013).  Instead, Congress relied on the states to condemn land the federal government required.  Id.  Accordingly, in 1845, the Court held that apart from the District of Columbia and the territories, which lay outside the boundaries of any state, “the United States have no constitutional capacity to exercise . . . eminent domain.” Pollard’s Lessee v. Hagan, 44 U.S. 212, 223 (1845).

[3] In Georgia v. City of Chattanooga, the Court held that Georgia could not prevent the State of Tennessee, or the entity to whom it had delegated its eminent domain powers, the City of Chattanooga, for using eminent domain to obtain land Georgia had acquired within the boundaries of Tennessee.

[4] In this respect, eminent domain resembles sovereign immunity.

[5] A brief history of the federal government’s use of eminent domain can be found at Environmental and Natural Resources Division, U.S. Department of Justice, History of the Federal Use of Eminent Domain (updated May 15, 2015).

[6] See, Steven D. McGrew, Selected Issues in Federal Condemnations For Underground Natural Gas Storage Rights: Valuation Methods, Inverse Condemnation, And Trespass, 51 CASE W. RES. L. REV. 131, 148-49 (2000).

[7] The author discusses the benefits and costs of delegating the eminent domain power to private entities.

[8] But under the PennEast panel’s ruling, the Eleventh Amendment might even be a bar to seeking a certificate of convenience before the Federal Energy Commission.  After all such a proceeding determines the amenability of state property to acquisition by eminent domain, and is initiated and litigated by a private entity, not the government.  Federal Maritime Comm’n v. South Carolina Ports Authority, 535 U.S. 743 (2002), holds that Eleventh Amendment immunity bars a federal agency, there the Federal Maritime Commission, from adjudicating a private party’s complaint against a nonconsenting State.

[9] A search for annotations under the U.S. Code Annotated reveals no cases on point.

[10] And given the inadequacy of the concept of “just compensation,” which tend to undervalue the loss of the property, see, Legislatively Revising Kelo, at 174, taking property from the State is an even greater indignity.  Granted, the Uniform Relocation Assistance and Real Property Acquisition Policies Act (1970) (“URA”), Pub.L. 91–646, 84 Stat. 1894 (Jan. 2, 1971), as amended (codified at 42 U.S.C. §§4601-4655), was adopted to ameliorate the harshness of the common law valuation of property taken by eminent domain.  (The question of whether the policies apply to state-owned properties, and whether it applies to natural gas companies acting pursuant to section 717f(h) must await further research.)

[11] Granted, private entities will more often sue state governments than they are likely to take their property.  In that sense abrogation of sovereign immunity is an “affront” to the state that has greater fiscal implications.

[12] Essentially, by creating a sovereign, not just a confederation, the states could be viewed as consenting to suit in federal court to effectual the private exercise of delegated authority to invoke eminent domain.  See, Central Virginia Community College v. Katz, 546 U.S. 356 (2006)(by consenting to the Constitution, the state relinquished their right to assert sovereign immunity in bankruptcy proceedings).

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