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.

New Jersey Resources Loses Confidence in PennEast

“No reliance on PennEast”

Yesterday, New Jersey Resources held its 2020 “Analyst’s Day”, when it woos financial analysts to pitch their financial story for growth.

In a surprise twist, the prepared remarks and presentations attached to the Analysts Day indicated that NJR had lost faith in PennEast coming to fruition anytime soon. NJR CEO Steve Westhoven stated:

“NJR remains committed to the PennEast project, but we’re removing a completely from our financial projections. PennEast is an important project for the Northeast. The uncertainty around an in-service state requires us to take this action. CapEx spend will continue to be prudent and minimal as the project work towards approval and construction.”

In the presentation, NJR has a slide showing their growth strategy for fiscal years 2021 to 2024. In all four columns, for each year, they reiterate “No reliance on PennEast”.

This means the project’s not dead yet, but NJR has about zero confidence in it going anywhere within 2021, and is noticeably going to reduce any additional investments into it.

Extensive commentary on the PennEast DRBC May 2020 Application

Today 13 grassroots organizations, environmental groups, and individuals came together and submitted an extensive set of comments to the Delaware River Basin Commission on the PennEast Pipeline application.

The main set of comments is available here (29MB): https://drive.google.com/file/d/1qe0cbw4Y-9jMMaW1IbL-Z1f7I-semNV5/view?usp=sharing

The referenced Appendix A is available here (40MB): https://drive.google.com/file/d/1KILvDfi9x_nvv3v_PiCKMDJLFHEfEPVP/view?usp=sharing

The comments document the numerous errors, evasions, misrepresentations, and outright deceptions contained within the application, and urges the Commission to reject the application with prejudice.

Put simply, PennEast’s application is appalling.  Our comments go on for 30 pages about the never ending problems with the application, and is only scratching the surface.

Overall, there are 6 patterns of problems that were found:

1. The application has many errors. It is sloppily prepared and does not appear to have been reviewed properly for accuracy.

2. PennEast is clearly guilty of using a variety of techniques to collectively lower its apparent impacts within the DRB artificially

3. PennEast explicitly misleads about impacts in several places, and does not acknowledge the scenic aspect of the landscape in the northern portion of its project.

4. PennEast has a history of trying to evade regulatory oversight by numerous agencies, including the DRBC.

5. PennEast has failed to document any tangible benefit to the public from its project.

6. PennEast has mixed seemingly random materials from out of time to present a patchwork of an application to the Commission.

 

I sincerely hope the Commission takes these comments seriously and takes the right action here – reject a clearly flawed and intentionally misleading application.

 

PennEast’s Lawyers Have Run Out of Arguments

Yesterday, PennEast’s lawyers submitted a brief to the Supreme Court attempting to rebut the State of NJ’s brief in opposition of the Court taking up PennEast’s case.

The brief was astonishing in its single minded message: the apocalypse is here.

As I read through the brief, I imagined it to be a modern narrative of Dante’s Inferno. Man being punished for its transgressions, no matter how minor, in the most gruesome fashion possible. For minor bobbles, PennEast was being excoriated, and darn it, it’s not fair!

According to PennEast’s lawyers, the sky is not only falling, it’s crashing in on the industry like a runaway dinosaur killer meteor. Demons are roaming the lands unopposed. Volcanoes are covering the Earth in lava, while tornadoes rip the rest apart, and hurricanes flood the ruins. Mutant undead are being born of horrible, twisted monsters. And as a plague of locusts and frogs and slime torrents down on the industry, PennEast and the other pipeline companies are staring at a stark future – a grim place where State Attorney Generals will morph into robotic Terminators, coming to hunt pipeline companies down one by one in a hellish landscape of nearing dystopia.

Hell on Earth is upon us all, and it is all the State of New Jersey and the 3rd Circuit’s Fault!

Read the brief for yourself:

So perhaps my imagination is running away from me, but indeed PennEast’s response is incredibly overwrought and hyperbolic in the extreme. PennEast’s lawyers say the 3rd circuit decision “Invalidates An Act of Congress!”. They claim the State of NJ “fails to demonstrate any real constitutional concern to avoid”, completely blind to the fact that the entire NJ argument is about the 11th amendment and the Constitutionally-provided protections given to it as a Sovereign State under the law. They repeatedly calls the States’ claims “peculiar”, despite the fact that the 3rd Circuit found for the State unanimously, with no dissent from either the 3 Judge panel nor in the en banc request of the full court.

They claim the question at hand is “exceptionally important”, and “threatens a profound disruption” of the industry. They claim “everyone” begs to differ with the State and the 3rd circuit.

All of these claims come about without a single footnote or reference, and an anemic table of authorities that looks like an intern phoned it in. And no where do they even mention the 11th Amendment of Sovereign Immunity, the core of both the State’s argument and the 3rd Circuit ruling.

PennEast’s lawyers have no legal argument here at all, and attempt to make none. This brief of theirs is nothing more than fire and brimstone, a naked attempt to troll the Court for bonus points. I don’t know it for a fact, but I suspect this was not the lawyer’s idea. I imagine some executive at UGI or another PennEast executive screamed at the lawyers for a few hours “to do something now!”, and this is the end result.

I suspect the Court will see this brief for what it is, and recycle the paper its printed on appropriately.

PennEast can’t help but trip over itself

Last Friday, May 1, 2020, PennEast filed a response to FERC’s April 1, 2020 Data Request on docket CP20-47-000.

As you might expect, while reading the response the image of the Keystone Kops tripping over themselves in pursuit of a villain came to mind.

The request was pretty simple, so I thought PennEast had a shot to get it at least mostly right.  What FERC said was that the abbreviated filing on this docket talked only about the Certificated Route on CP15-558, but didn’t include emissions information for the 4 PA Route changes on their amended Certificate from 2019.  OK – so submit new tables for those four changes, and they’re done – easy peasy lemon squeezy.

But no – of course not.  The response is muddled, confusing, inaccurate, contradictory with both itself and with other responses, and is riddled with errors.  I filed a Motion to the docket trying to describe all the issues (and as it is, I probably missed some – it’s that bad).

My submission is here:

MichaelSpille-CP20-47-MotionToAnswerAndAnswer-6.PDF

Here are some of the issues:

  1. PennEast starts out  on the wrong foot.  Rather than saying they were responding to the request to include data on the CP19-78 2019 changes, they go into a torturous description of how they got there.  The end result is you have no idea what exact data they are supplying – will it be the original route from 2018?  The 2019 one?  A jumble of those plus the current amendment application?  Who knows!
  2. PennEast botches nearly all of their table references.  Most of the tables say things like “Table Error! No text of specified style in document-5.2 Revised Conformity Determination”.  Yeah, no one proofed the damn thing and it’s filled with technical errors.  Some tables aren’t referred to at all and just sit out there, lonely and confused.
  3. PennEast adds in data about Phase 2.  Even though it wasn’t asked for, PennEast supplied it anyway – a whole bunch of theoretical impacts from Phase 2.  And of course, a bunch of it is wrong.  For one, the construction pollutant numbers are not consistent with those of Phase 1.  Argh!
  4. PennEast leaves out a bunch of tables because “hey, we don’t think they changed”.  Um…..
  5. PennEast quietly takes out the Columbia-TCO connection at Hellertown.  Without fan fare, warning, or otherwise saying what they’re doing, they quietly indicate that the Columbia-TCO connection has moved to Church Road.  This changes the Purpose and Need of Phase 2 entirely, making Phase 2 look even less beneficial than it was.  This information is buried in a footnote despite being a major change.
  6. The Operational Emissions tables are filled with errors!  Tons of them.  Anywhere they couldn’t copy and paste from the Final EIS or the abbreviated filing, they muffed the calculations.  They double count stuff, they get the number of compressors wrong, they get basic math wrong, and fugitive emissions and venting seem to be basically random!
  7. They get docket references wrong.  FERC 101 and they flubbed it.
  8. They don’t understand their own changes at the Kidder Compressor Station, so they fake it.  Yes.

In all, this Response is astounding.  It is clear that PennEast rushed this out the door to meet deadlines, and sacrificed any sort of accuracy for speed.  And why?  It ain’t like they’re going anywhere anytime soon.