Supreme Court Loss Isn’t What Some People Think it Is

On June 29th, 2021, the Supreme Court finally ruled on the case PENNEAST PIPELINE CO., LLC v. NEW JERSEY ET AL. This was the case centering around eminent domain authority, and the State of New Jersey’s challenge to PennEast about being sued in federal eminent domain court. For background, NJ had appealed a ruling in condemnation court, and the the 3rd Circuit Court of Appeals had ruled in New Jersey’s favor, effectively saying that PennEast suing New Jersey in Federal eminent domain court violated the 11th amendment. The legal theory here was that under the 11th amendment the State of New Jersey is a sovereign entity that cannot be sued in Federal courts by citizens of other states. In this case, PennEast is considered a citizen of Delaware. As of that decision, PennEast was blocked from going forward with it’s project completely.

Unfortunately, the Supreme Court ruled against New Jersey, and reversed the 3rd circuit opinion. The opinion is available here. But this isn’t the loss that many people think it is.

What the Supreme Court decision did was unstick a bunch of things that were stuck for PennEast, but it does not solve any of its fundamental problems. Given, a win at SCOTUS would have been an instant death knell for PennEast. But we didn’t get that, and by now I don’t think anyone has any expectations of quick wins on this topic. We’ve been at this for 7 long years.

So with the SCOTUS opinion behind us, here is what PennEast has left….

  • D.C. Court of Appeals cases against the FERC Certificate. A number of cases against the FERC decision from years ago were blocked by the Supreme Court appeal. Those cases can now go forward. Normally, this would be pro forma as it has been very hard to win against FERC in this venue. Except….
  • The Spire case. Earlier this month the D.C. Circuit Court of Appeals ruled that FERC’s determination of Public Convenience and Necessity of the Spire pipeline was a crock. Specifically, the D.C. Circuit held that FERC used boilerplate language in approving Spire, and completely ignored its own internal policies for weighing public benefits of a given pipeline against its impacts. Specifically, FERC noted that Spire had a precedent agreement, and rubber stamped the project based on that and that alone. The D.C. Circuit is telling FERC they have to stop rubber stamping that way. And by the way, the fact that the Spire precedent agreement was with an affiliate was also a big problem for the Court. Such agreements are not arms length and have to be scrutinized very closely. Which means….
  • PennEast’s 2-phase application that has been in limbo due to the stuck D.C. Court of Appeals cases is in trouble too. PennEast’s amended application’s only proof of need is based only on precedent agreements with 3 PennEast Companies – New Jersey Resources, South Jersey Industries, and UGI Corp. PennEast’s application has just hit the shoals of the Spire precedent. With a New Democratic FERC commissioner who has demonstrated the agency needs to change, PennEast application is likely sinking fast. Meanwhile….
  • PennEast’s application to the Delaware River Basin Commission has been languishing for over a year with no movement. DRBC has been urged by thousands of people and government leaders to close PennEast’s application because it is so deeply flawed in so many ways, and due to the extensive impact the project would have in the Delaware River watershed. And if that isn’t enough…
  • NJDEP has denied PennEast’s Clean Water Act application twice so far. And there is no indication that the third time is going to the charm for PennEast. And finally….
  • Two of the PennEast owning companies have already cried “Uncle!”. NJR declared that they are no longer tracking the project in their future financials, and UGI has given up on it as well. Two of the other companies have never particularly cared about PennEast, as they inherited it via acquisitions, and that leaves just SJI teetering on the brink.

So PennEast “Won” at the Supreme Court, but while they won that battle they are on the brink of losing the war. The owners are exhausted and still stinging from having spent half a billion dollars so far with zero returns, and PennEast still fights vicious battles at the DRBC and NJDEP that it has historically lost. This “win” may be the final event that causes them to throw in the towel and stop throwing good money after bad.

A final note – while this was hailed by the fossil fuel industry as a huge “win” for them, in fact this was very close. Many commentators have noted that Justice Barrett was likely chosen to write the original majority opinion, and her opinion was in favor of the State of New Jersey. This case went right down to the end of the calendar year for the court, and ultimately Chief Justice Roberts took the case himself and eked out a 5-4 majority in favor of PennEast, likely by horse trading with one or two of the justices to get them to side with him. An unfortunate truth at the Supreme Court is that for close cases, they are often as not decided by persuasion and political power more than on legal theories. And Roberts in particular is known to decide what he thinks a good outcome is first, and then make up legal theory to get him there (see also the Obama care string of rulings). Reading the majority opinion is a bit painful as Roberts invents some colorful ideas to get where he wants to go. Meanwhile, Barrett and Gorscuch each wrote dissents that were breathtakingly straightforward and fully supported by precedent and history.

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Mike Spille

I'm a thinker, an analyzer, a synthesizer. Maybe not in that order. I live in West Amwell NJ with my wife Kristina, our two kids Day and Z, our two dogs Fern and Cinna, and three cats Ponce de Leon, Oliver, and Doolittle.

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