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New Jersey Conservation Foundation v. Federal Energy Regulatory Commission

United States District Court, D. New Jersey

October 29, 2018



          Hon. Freda L. Wolfson U.S. District Judge.

         In January 2018, defendant Federal Energy Regulatory Commission (“FERC” or “Commission”), issued an order granting third-party PennEast Pipeline Company, LLC (“PennEast”) the right to construct and operate an interstate natural gas pipeline. Several parties to that agency proceeding, including Plaintiff New Jersey Conservation Foundation (“NJCF” or “Plaintiff”), have sought rehearing before the agency. While those requests were pending, NJCF brings this separate matter challenging FERC's purported ongoing pattern and practice of issuing certificates in violation of the Fifth Amendment of the United States Constitution.[1] In the present matter, Defendants move to dismiss for lack of subject matter jurisdiction, arguing, inter alia, that FERC's authorizing statute, i.e., the Natural Gas Act (the “NGA”), vests the courts of appeals with exclusive jurisdiction to hear the type of claims asserted by Plaintiff in this case. For the reasons set forth below, Defendants' motion to dismiss is GRANTED.


         I. Statutory and Regulatory Background

         FERC is an “independent regulatory commission comprising up to five members appointed by the President, with advice and consent of the U.S. Senate.” Department of Energy Organization Act, 42 U.S.C. § 7171(a)-(b). Commissioners may serve up to five-year terms, and no more than three members of the Commission may be members of the same political party. § 7171(b)(1). Each member has one vote and actions are determined by majority vote. As a governmental agency, FERC is relegated with the authority to regulate the interstate transmission and wholesale sale of electricity and natural gas, and licenses the construction and operation of hydropower projects, natural gas pipelines, and the projects' infrastructure.

         The NGA, 15 U.S.C. § 717, et seq., confers on the Commission “exclusive jurisdiction” over the “transportation and sale of natural gas in interstate commerce.” Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300-301 (1988) (the NGA is a “comprehensive scheme of federal regulation”); see Del. Riverkeeper Network v. FERC, 243 F.Supp.3d 141, 144 (D.D.C. 2017). Section 7 of the Act governs the process for obtaining a certificate authorizing the construction, extension, or abandonment of natural gas pipeline facilities. See 15 U.S.C. § 717f; Del. Riverkeeper, 243 F.Supp.3d at 144-45 (describing FERC certification process); Myersville Citizens for a Rural Cmty., Inc. v. FERC, 783 F.3d 1301, 1307-08 (D.C. Cir. 2015). The Commission may issue a certificate only if it finds that the proposed project “is or will be required by the present or future public convenience and necessity, ” and may attach to the certificate “such reasonable terms and conditions as the public convenience and necessity may require.” 15 U.S.C. § 717f(e). The NGA also permits any person aggrieved by a FERC order to seek rehearing before the Commission within thirty days after the order's issuance. 15 U.S.C. § 717r(a). After FERC issues a rehearing order, a party aggrieved by that particular order may seek judicial review in the appropriate court of appeals. 15 U.S.C. § 717r(b). Importantly, the Act vests jurisdiction in the U.S. Courts of Appeals to review final FERC orders and all matters inhering in a pipeline certificate. Id.

         II. PennEast Pipeline Certificate[2]

         In September 2015, PennEast submitted an application pursuant to the NGA, 15 U.S.C. § 717f(c), to construct and operate an interstate natural gas pipeline extending from Pennsylvania to New Jersey. Numerous parties, including Plaintiff, intervened in that FERC proceeding, in addition to submitting comments on the application to FERC. Upon filing PennEast's application, FERC's Office of Energy Projects (the “Office”) initiated an environmental review process in accordance with the National Environmental Policy Act (“NEPA”), 42 U.S.C. § 4321, et seq., to study the potential impact of the proposed pipeline. In that regard, the Office concluded that the proposed pipeline would result in some adverse effects, but they would be reduced to “less than significant levels” with the implementation of certain mitigation measures. See Final Environmental Impact Statement at ES-18. These proposed mitigation measures were recommended as conditions to any final authorization by FERC.

         On January 19, 2018, FERC issued its Certificate Order of “public convenience and necessity, ” with one Commissioner dissenting, adopting the Office's findings. Consequently, FERC granted a Certificate to PennEast, subject to compliance with environmental and operating conditions. Thereafter, numerous parties, including Plaintiff, filed requests for agency rehearing. Plaintiff also moved to stay the Certificate Order.

         Following the application for rehearing, FERC has the “power to grant or deny rehearing or to abrogate or modify its order without further hearing” within 30 days; otherwise the request is considered denied. 15 U.S.C. § 717r(a). On February 22, 2018, the Commission's Deputy Secretary issued a tolling order, granting rehearing for the limited purpose of affording the Commission time to consider the rehearing requests. During the pendency of the instant motion, the Commission issued a final order denying rehearing in the PennEast pipeline proceeding. Thereafter, Plaintiff, along with other third-parties, filed a petition for review of the Commission's PennEast orders pursuant to the NGA in the U.S. Court of Appeals for the D.C. Circuit.[3]

         C. Plaintiff's Complaint

         NJCF is a 501(c)(3) not-for-profit organization headquartered in Far Hills, New Jersey. Compl., ¶ 13. The purpose of the organization is preserving New Jersey's land and natural resources. Id. In that endeavor, NJCF owns over 20, 000 acres of land preserved for the benefit of the public and the environment. Id. Indeed, NJCF owns property in Hunterdon County along the proposed route of the PennEast pipeline. Id. at ¶ 14. NJCF's land is subject to eminent domain proceedings under the Certificate at issue. Id. Plaintiff alleges that the pipeline will impact NJCF's property by interfering with NJCF's ownership of, access to, and normal use of its private lands. Id. at ¶ 15. NJCF further alleges that it will suffer economic harm if the public, members, and potential members cannot use the land as originally intended. Id.

         In the Complaint, Plaintiff asserts three causes of action: (1) FERC's issuance of certificates that delegate the power of eminent domain in the absence of adequate public use analyses violates the Takings Clause of the Fifth Amendment; (2) FERC's practice of granting eminent domain prior to receiving environmental impact findings from regulatory agencies charged with making them violates the Fifth Amendment; and (3) FERC's practice of issuing a certificate conditioned on subsequent state or federal authorizations that may require changes to the pipeline route or prevent construction also violates the Takings Clause. In that regard, Plaintiff seeks a judgment and order declaring FERC's pattern and practices unconstitutional. Significantly, in its Complaint, Plaintiff painstakingly characterizes its claims as constitutional in nature, and that it is raising an issue of first impression - whether a conditional certificate, issued by FERC, that is not sufficient to authorize pipeline construction may constitutionally permit a private company to condemn land for a pipeline that may never be built.

         In the instant matter, Defendants move to dismiss the Complaint for lack of subject matter jurisdiction. They argue that because the NGA vests the appropriate court of appeals - in this case, the Third Circuit or the D.C. Circuit - with exclusive jurisdiction to hear matters inhering in a pipeline certificate proceeding, this Court lacks jurisdiction to hear Plaintiff's claims.[4]


         I. Legal Standard

         Federal Rule of Civil Procedure 12(b)(1) mandates the dismissal of a case for “lack of subject-matter jurisdiction.” Fed.R.Civ.P. 12(b)(1). When jurisdiction is challenged pursuant to Rule 12(b)(1), the plaintiff bears the burden of persuading the court that subject matter jurisdiction exists. See Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991); Rudolph v. Adamar of N.J., Inc., 153 F.Supp.2d 528, 533 (D.N.J. 2001); see also Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005).

         In evaluating a Rule 12(b)(1) motion to dismiss, courts must determine whether the motion attacks the complaint as deficient on its face, or whether the motion attacks the existence of subject matter jurisdiction in fact, apart from any pleadings. Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). In a case where a defendant presents a factual attack, the court may consider evidence outside the pleadings. See Gotha v. United States, 115 F.3d 176, 178-79 (3d Cir. 1997); Mortensen, 549 F.2d at 891-92. When a defendant attacks subject matter jurisdiction “in fact, ” it disputes the existence of certain jurisdictional facts alleged by the plaintiff. See Carpet Group Intern. v. Oriental Rug Importers Ass'n, Inc., 227 F.3d 62, 69 (3d Cir. 2000). In such a situation, “no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Mortensen, 549 F.2d at 891. Additionally, the burden of proving the existence of subject matter jurisdiction always lies with the plaintiff. Id.

         Here, there is no dispute that Defendants mount a facial challenge to subject matter jurisdiction.

         II. Jurisdiction under the NGA

         Defendants argue that this Court lacks subject matter jurisdiction because the NGA vests exclusive jurisdiction in the appropriate courts of appeals to hear the very type of claims raised by Plaintiff in this case. First, Defendants characterize this suit as the latest in a series of recent district court challenges to the natural gas pipeline certificate process administered by FERC. According to Defendants, the district courts that have addressed such recent challenges have concluded uniformly that they lack subject matter jurisdiction to hear such claims because, under section 19 of the Act, 15 U.S.C. § 717r, the courts of appeals have exclusive jurisdiction to review all matters inhering in natural gas pipelines certificate proceedings before FERC.

         In response, Plaintiff contends that Section 717r does not apply here, since this matter challenges FERC's general pattern and practice of granting unconstitutional certificates. According to Plaintiff, the NGA only provides that parties may obtain review of FERC orders in the court of appeals, but does not expressly limit the jurisdiction that other statutes confer on district courts, such as 28 U.S.C. § 1331.[5] Rather, applying the framework set forth by the Supreme Court in Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994), Plaintiff argues that its claims are not precluded by the NGA, because they are 1) wholly collateral to the statute's review provisions; 2) outside FERC's expertise; and 3) preclusion would foreclose all meaningful judicial review. See Id. at 207-213. I disagree with Plaintiff's position in this regard, since the weight of the authorities suggests otherwise. Rather, I find that 1) the NGA explicitly precludes review of the constitutional claims raised in this case; and 2) even if the Court were to apply the Thunder Basin framework, jurisdiction would remain lacking. I turn next to those discussions.

         As the Third Circuit has recently advised, “the NGA is a detailed statute, setting forth specific provisions on the procedure by which approval and subsequent review of a pipeline project may be attained.” Adorers of the Blood of Christ v. FERC, 897 F.3d 187, 194 (3d Cir. 2018). The pertinent language from Section 19 of the NGA, 15 U.S.C. § 717r, provides that “[a]ny person ... aggrieved by an order issued by the Commission in a proceeding under this Act [15 USCS §717 et seq.] to which such person . . . is a party may apply for a rehearing within thirty days after the issuance of such order.” § 717r(a). If, and only if, a party files for rehearing may the party obtain judicial review: “No proceeding to review any order of the Commission shall be brought by any person unless such person shall have made application to the Commission for a rehearing thereon.” Id. Subsection (b) states that a party may obtain review of FERC's order “in the court of appeals of the United States for any circuit wherein the natural-gas company to which the order relates is located or has its principal place of business, or in the United States Court of Appeals for the District of Columbia . . . .” § 717r(b). The statute describes such a review as “exclusive, ” noting that “[u]pon the filing of such petition such court shall have jurisdiction, which upon the filing of the record with it shall be exclusive, to affirm, modify, or set aside such order in whole or in part.” Id. It also requires exhaustion: “No objection to the order of the Commission shall be considered by the court unless such objection shall have been urged before the Commission in the application for rehearing unless there is a reasonable ground for failure to do so.” Id.

         Indeed, the Third Circuit has recognized that the NGA's exclusive jurisdiction provision is broad in scope, such that the Act is “the exclusive remedy for matters relating to the construction of interstate natural gas pipelines. It forms the paradigm by which FERC operates in matters related to interstate natural gas pipelines.” Adorers, 897 F.3d at 195. In that regard, the court cautioned that a party may not bypass the NGA by suing the agency in federal district court under § 1331, because the statutory scheme is the specific method that Congress has provided for reviewing adverse FERC actions. Id. at 197 (citing Gen. Fin. Corp. v. F.T.C., 700 F.2d 366, 368 (7th Cir. 1983)). Instead, the specific statutory method, if adequate, is exclusive. Id.

         Several sister circuits are in accord. Like the Third Circuit, the Fourth Circuit has found that the NGA “vests exclusive jurisdiction to review all decisions of the Commission in the circuit court of appeals . . .; there is no area of review, whether relating to final or preliminary orders, available in the district court. And this has been the uniform construction given the statute.” Consol. Gas Supply Corp. v. FERC, 611 F.2d 951, 957 (4th Cir. 1979); Berkley v. Mt. Valley Pipeline, LLC, 896 F.3d 624, 628 (4th Cir. 2018). Similarly, the Tenth Circuit has explained that the NGA's jurisdictional provision precludes litigation “between the parties of all issues inhering in the controversy, and all other modes of judicial review, ” noting that it “would be hard pressed to formulate a doctrine with a more expansive scope.” Williams Nat. Gas Co. v. City of Oklahoma City, 890 F.2d 255, 261-62 (10th Cir. 1989).

         As an example of the NGA's expansive scope, the Sixth Circuit affirmed the district court's dismissal for lack of jurisdiction under the NGA, where landowners sought to enjoin the building of a pipeline and recover tort damages for conversion; in so holding, the circuit court emphasized that “[e]xclusive means exclusive, and the NGA nowhere permits an aggrieved party otherwise to pursue collateral review of a FERC certificate in state court or federal district court.” Am. Energy Corp. v. Rockies Express Pipeline LLC, 622 F.3d 602, 605 (6th Cir. 2010). Likewise, the First Circuit affirmed the district court's dismissal of claims, which challenged FERC's action in a licensure proceeding, for lack of subject matter jurisdiction by relying on the judicial review provision of the Federal Power Act (“FPA”). Maine Council of Atlantic Salmon Federation v. National Marine Fisheries Service, 858 F.3d 690 (1st Cir. 2017).[6] The court made clear that the FPA's jurisdictional provision, [7] which is materially identical to the NGA's, is exclusive not only to review the terms of the specific FERC order, but over “any issue ‘inhering in the controversy.'” Id. at 693(emphasis added) (citing City of Tacoma v. Taxpayers of Tacoma, 357 U.S. 320, 336 ...

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