PennEast Pipeline pauses land acquisitions in Pennsylvania

The proposed PennEast Pipeline announced an abrupt halt to legal proceedings to secure needed property easements for its 118-mile Pennsylvania-to-New Jersey natural gas pipeline, a move that raises new questions about the project’s future.

PennEast cited a desire to clear regulatory hurdles before resuming the court cases to secure the approximately 70 properties it needs in Pennsylvania. Patricia Kornick, a spokeswoman for the project, said there was no timetable for when the proceedings might resume. She characterized the move as merely a temporary pause and a “procedural step.”

However, federal filings by companies behind the project painted a starker and dimmer picture about the project’s future.

Quarterly reports by the companies that make up the PennEast backers each shared similar language about how regulatory and legal challenges have clouded the start of construction and prompted them to declare multi-million-dollar write-offs in connection with the project.

For instance, UGI Energy Services, one of five partners with a 20 percent stake in PennEast, said it was taking a $93 million impairment charge. “The ultimate outcome of the PennEast construction project cannot be determined at this time,” it said in a regulatory filing.

Another project backer, New Jersey Resources, reported a charge of $92 million, citing “management’s estimates and assumptions regarding the likelihood of certain outcomes related to required regulatory approvals and pending legal matters, the timing of which remains uncertain.”

PennEast has had many corkscrew twists since it got started in 2014 but its announcement last week that it was shelving the property acquisitions in Pennsylvania took even opponents by surprise.

PennEast had filed lawsuits against private property owners in federal court in Pennsylvania, seeking easements for the 36-inch pipeline, which would wind its way through Carbon, Luzerne, Monroe and Northampton Counties in Pennsylvania.

It was during a conference call with a judge in the case on Aug. 9 that a PennEast lawyer made the surprise announcement about suspending proceedings.

“PennEast believes it is not prudent to complete the acquisition of the rights of way in the pending actions in Pennsylvania, as it might not be necessary for some time,” Kornick said. “PennEast is exploring with attorneys representing landowners the idea of dismissing the actions without prejudice and restarting legal proceedings once it clears the regulatory hurdles and has a better understanding of when it would need to acquire the property interests.”

Kornick did not clarify why PennEast would not continue with acquisition proceedings at the same time it worked to clear regulatory hurdles.

The future of PennEast’s property acquisitions in New Jersey is so far unclear, said Timothy P. Duggan, a lawyer specializing in eminent domain cases and who is representing about 45 property owners, including nonprofits, municipalities, counties and private individuals. PennEast is looking to gain easements on about 140 parcels in New Jersey.

He said the number of cases filed in federal court by PennEast was double that of Pennsylvania because New Jersey land owners put up a stiffer fight, and in many cases did not allow PennEast access at all to conduct surveys.

“We would not budge on any issue as we fought the pipeline,” he said. As for what PennEast’s decision about the land in Pennsylvania might mean for the future of the project, Duggan said, “I think it’s too soon to say but I do think it is showing some level of doubt on their side.”

Michael Spille, the founder of West Amwell Citizens Against the Pipeline in Hunterdon County, N.J., said his reading of regulatory filings by project backers suggests they’re tired of financial losses and the announcement about the suspension of property acquisition efforts “says to me that they’re signaling to the market, look for all of this to go away.”

“PennEast started this back in 2014 with expectations to be in-service within a few years, but were utterly gobsmacked at the level of resistance in both New Jersey and Pennsylvania,” he added. “Since then, the partners combined have spent close to half a billion dollars with nothing to show for it.”

From the start, opposition to the pipeline has been energetic and galvanized activists across both states.

Though PennEast has billed itself as an affordable energy source to customers in New Jersey and Pennsylvania, opponents maintain it would harm the environment, including 87 waterways and 53 wetlands, and be a setback to a transition to cleaner, greener energy sources.

The proposal would send Marcellus Shale gas from Dallas, Pa., in northeastern Pennsylvania, to Transco’s pipeline interconnection near Pennington in Mercer County, N.J. A revised proposal called for splitting the construction into two phases: 68 miles of pipeline entirely in Pennsylvania, and the remaining 50 miles in both Pennsylvania and New Jersey. The pipeline in its second phase would cross the Delaware River near Riegelsville, Pa.

The project’s website called for the first phase to have an in-service date of November 2021 and the second phase, including the remaining portion of the route in Pennsylvania and New Jersey, being in service in 2023 – a timetable that is now all but evaporated.

PennEast faces layers of uncertainty, including the outcome of a federal court challenge led by the Delaware Riverkeeper Network and others to the process that the Federal Energy Regulatory Commission relied on in giving the go-ahead to the pipeline, and the need for permits from the U.S. Army Corps of Engineers, Delaware River Basin Commission, and the Departments of Environmental Protection in Pennsylvania and New Jersey.

Anthony M. Corby, a lawyer in Hershey, Pa., who specializes in eminent domain proceedings and who represents 18 clients whose land was targeted for acquisition by PennEast, said the project’s announcement was surprising given that it recently won a critical ruling from the U.S. Supreme Court.

In that case, the court in June ruled that PennEast had the authority to use eminent domain to acquire lands controlled by New Jersey for the project. The justices ruled 5-4 that it could initiate condemnation proceedings.

At issue before the Supreme Court was whether the federal government through the Federal Energy Regulatory Commission could constitutionally confer on pipeline companies the authority to condemn rights-of-way on properties in which a state claimed an interest.

Specifically, a provision made to the Natural Gas Act in 1947 authorized companies that had gained FERC’s approval to condemn all necessary rights-of-way, whether owned by private parties or states, said the majority opinion, which was written by Chief Justice John Roberts. New Jersey and others argued that the states’ sovereign immunity prevented the condemnation proceedings but a majority of the justices disagreed.

Patty Cronheim of Hopewell Township Citizens Against the PennEast Pipeline in New Jersey, said opponents were cautiously assessing last week’s PennEast announcement but not reading too much into it.

“We don’t know exactly what PennEast is up to or why they’re doing this,” she said. “We’re not doing a victory lap on this at all.”

Tracy Carluccio, deputy director of the Delaware Riverkeeper Network, agreed.

“We can’t rest assured that this is the signal to the end of the project,” she said, adding that the announcement could be some kind of prelude to shifting the pipeline route to include property owners more open to negotiating.

She did say, however, that the announcement reflected well on those who persevered in standing up to PennEast. “People can resist, and it can matter,” she said.