Here’s a case that’s pending in the New York Court of Appeals that has been briefed and is awaiting argument. 

In Natural Fuel Gas Supply Corp. v. Schueckler, No. 17-02021 (Nov. 9, 2018), the Appellate Division answered this question:

This appeal therefore presents a novel question of condemnation law: can a corporation involuntarily expropriate privately-owned land when the underlying public project cannot be lawfully constructed?

Slip op. at 1. 

The court stated it clearly: “We answer that question firmly in the negative.”

Like many projects, in order to be built this natural gas pipeline had a long and complex checklist. It needed approvals of FERC — a certificate of public convenience — under the Natural Gas Act. And certain approvals under the federal Clean Water Act. Which in turn meant it needed state enviro checkoffs, here a water quality certificate from a New York agency. It also needed to acquire the needed property, either by negotiation or by eminent domain (in this case, condemnation under state law). Under New York’s eminent domain law, if a condemnor obtains a certificate of public convenience, it is exempt from the usual process of proving public use and purpose. 

FERC ok’d the pipeline and granted the certificate of public convenience. But it wasn’t an unconditional certificate. It was, by law, subject to all those other things we mentioned above. It was the water quality certificate from the State of New York that proved to be the hangup. After it applied for — but before it actually obtained — that certificate, the pipeline began condemnation proceedings in a New York court to take the property.

But “[s]hortly after petitioner commenced the vesting proceeding, however, the New York State Department of  Environmental Conservation (DEC) denied petitioner’s application for a WQC. Slip op. at 5. Oops. “The WQC application, held the DEC, ‘fails to demonstrate compliance with New York State water quality standards.'” Id. The pipeline objected, naturally. It sought judicial review of the denial. That challenge remains pending. But if the denial of the enviro certificate is “ultimately upheld, the pipeline cannot be built.” Id. 

Back in the eminent domain case, the property owners objected to the taking. The pipeline doesn’t have a valid certificate of public convenience, they asserted. The New York Supreme Court (the trial division – yeah, we watch Law and Order (dun-dun) so we know that the “supreme” court is that state’s general jurisdiction trial court) disagreed, and “authorized the acquisition of the easements necessary for the construction and operation of the pipeline.” Slip op. at 7. As we wrote about a separate pipeline case, many courts view eminent domain as inevitable, and are not bothered terribly by the details.

The Appellate Division (4-2) reversed (“firmly” as the majority noted above). As long as FERC’s certificate of public convenience was subject to conditions, and those conditions are not met, the attempted taking lacks proof of a public use or purpose because the pipeline is not exempt from the usual requirement to establish a public use. 

Although it is true that a federal commission issued a certificate of public necessity approving petitioner’s pipeline project, the certificate nevertheless authorized construction of the pipeline “subject to” various conditions, including, as discussed above, the State’s issuance of a WQC. “ ‘[S]ubject to’ . . . language means what is says: no vested rights are created . . . prior to” the occurrence of the condition to which the instrument is subject (Moran v Erk, 11 NY3d 452, 456 [2008]). Thus, when the State denied the very permit upon which petitioner’s authority to construct the pipeline was conditioned, petitioner – by definition – lost its contingent right to construct the public project[.]

Slip op. at 8.  

Conditions unsatisfied means no valid FERC certificate. No FERC certificate means no exemption from the usual showing of public use or purpose. The majority rejected the pipeline’s argument that a valid and fully realized FERC certificate was not a condition precedent to taking property, and was only needed to start actual construction. That “entire line of argument is a non sequitur.” Slip op. at 8. Nor did the court accept the pipeline’s argument that a fully vested FERC certificate wasn’t needed to start taking the property:

Rather, the lodestar of petitioner’s eminent domain power is the public project authorized by the certificate (see Transportation Corporations Law § 83). The certificate, in other words, simply authorizes the public project, and the power of eminent domain stands or falls with that project as a necessary ancillary to its implementation (see generally NY Const, art 1, § 7 [a]). Thus, when the public project cannot be legally completed, any eminent domain power in connection with that project is necessarily extinguished.3 To say otherwise would effectively give a condemnor the power to condemn land in the absence of a public project, and that would violate the plain text of the State Constitution.

Slip op. at 9. 

The court also rejected the old “well, they’re going to be compensated for it so what’s the problem” argument as “entirely besides the point.” Id. “in a constitutional order such as ours, jealous as it is of the right to own property and do with it as one pleases, only a viable public project can force respondents to surrender their rights in their land.” Id. If only the federal courts of appeals understood that!

The dissenters pointed out that a later-filed order seemed to moot the objections (appellate procedure mavens, take note and compare page 10 of the dissent with the second paragraph of footnote 2 of the majority opinion on page 6): “in an order issued August 6, 2018 … the DEC waived its WQC certification authority under section 401 of the Clean Water Act. Thus, as things now stand, the DEC’s denial of the WQC is no longer an impediment to construction of the pipeline.” Dissent at 10. Amazing things happen when you have the agency in your hand, no? The court should take judicial notice of that bit of administrative sleight of hand because it makes the you-don’t-have-a-valid-FERC-certificate argument irrelevant, according to the dissent.   

After all that, the New York Court of Appeals agreed to review the issue. The briefs have been filed, and we’re awaiting oral argument.

So stay tuned, everyone. We’ll keep following along (even if the pipeline asks to dismiss for appellate mootness, a motion we would not be surprised to see). 

National Fuel Gas Supply Corp. v. Schueckler, No. 17-02021 (N.Y.A.D. Nov. 9, 2018)