Nat'l Fuel Gas Supply Corp. v. Schueckler

• Decision Date: 09 November 2018
• Docket Number: 725,CA 17–02021
• Parties: In the Matter of NATIONAL FUEL GAS SUPPLY CORPORATION, Petitioner–Respondent, v. Joseph A. SCHUECKLER, Theresa F. Schueckler, Respondents–Appellants, et al., Respondents.
• Court: New York Supreme Court — Appellate Division

167 A.D.3d 128
88 N.Y.S.3d 305

In the Matter of NATIONAL FUEL GAS SUPPLY CORPORATION, Petitioner–Respondent,
v.
Joseph A. SCHUECKLER, Theresa F. Schueckler, Respondents–Appellants, et al., Respondents.

725
CA 17–02021

Supreme Court, Appellate Division, Fourth Department, New York.

Entered: November 9, 2018

LAW OFFICE OF GARY A. ABRAHAM, GREAT VALLEY (GARY A. ABRAHAM OF COUNSEL), FOR RESPONDENTS–APPELLANTS.

PHILLIPS LYTLE LLP, BUFFALO (CRAIG A. LESLIE OF COUNSEL), FOR PETITIONER–RESPONDENT.

PRESENT: CARNI, J.P., LINDLEY, NEMOYER, CURRAN, AND WINSLOW, JJ.

OPINION AND ORDER

Opinion by NeMoyer, J.:

It is hereby ORDERED that the order so appealed from is reversed on the law without costs and the petition is dismissed.

Petitioner National Fuel Gas Supply Corporation wants to build an interstate gas pipeline that would run, in part, across the land of Joseph A. Schueckler and Theresa F. Schueckler (respondents). The State of New York, however, has blocked the entire pipeline project by denying petitioner the necessary environmental permits. Notwithstanding the barrier posed by the State's regulatory action, petitioner still seeks to acquire easements over respondents' land by eminent domain. 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? We answer that question firmly in the negative.

I

This case lies at the intersection of federal law governing interstate pipeline construction and state law governing eminent domain procedure. In order to properly contextualize the underlying facts and the parties' arguments, we will first sketch out the applicable statutory framework.

A. Federal Interstate Pipeline Construction Law

The regulatory process for constructing a natural gas pipeline across state lines is spelled out in the federal Natural Gas Act (NGA) ( 15 U.S.C. § 717 et seq. ). Under the NGA, a company wishing to construct such a pipeline must apply for a "certificate of public convenience and necessity" (certificate) from the Federal Energy Regulatory Commission (FERC) ( 15 U.S.C. § 717f [c], [d] ). Following the necessary review and public hearing, "the application shall be decided in accordance with the procedure provided in subsection (e) of [section 717f ] and such certificate shall be issued or denied accordingly" ( § 717f [c] [1] [B] ).

Subsection (e) of section 717f, in turn, says as follows:

88 N.Y.S.3d 308

"a certificate shall be issued to any qualified applicant therefor, authorizing the whole or any part of the ... construction ... covered by the application, if it is found that the applicant is able and willing properly to do the acts and to perform the service proposed and to conform to the provisions of [the NGA] and the requirements, rules, and regulations of the [FERC] thereunder, and that the proposed ... construction ..., to the extent authorized by the certificate, is or will be required by the present or future public convenience and necessity; otherwise such application shall be denied. The [FERC] shall have the power to attach to the issuance of the certificate and to the exercise of the rights granted thereunder such reasonable terms and conditions as the public convenience and necessity may require."

The import of a valid and effective certificate cannot be overstated in this context, for the NGA explicitly provides that "[n]o natural-gas company ... shall ... undertake the construction or extension of any [pipeline] facilities ... unless there is in force ... a certificate of public convenience and necessity issued by the [FERC] authorizing such acts" ( 15 U.S.C. § 717f [c] [1] [A] [emphasis added] ).

In exercising its power conferred by section 717f (e) to condition a certificate "[i]n conjunction with the ... review of a natural gas project application, [the FERC] must ensure that the project complies with the requirements of all relevant federal laws, including ... the Clean Water Act (CWA) [ 33 U.S.C. § 1251 et seq. ]" ( Islander E. Pipeline Co., LLC v. Connecticut Dept. of Envtl. Protection, 482 F.3d 79, 84 [2d Cir.2006] ). Insofar as relevant here, the CWA obligates "[a]ny applicant for a Federal license or permit to conduct any activity including, but not limited to, the construction or operation of facilities, which may result in any discharge into the navigable waters" — such as the construction of an interstate natural gas pipeline—to obtain a water quality certification (WQC) from each affected State ( 33 U.S.C. § 1341 [a] [1] ). If a WQC is granted, the affected State certifies that the pipeline will be built and operated in a manner that complies with the CWA's "effluent limitations and other pollutant control requirements, including state-administered water quality standards" ( Delaware Riverkeeper Network v. Federal Energy Regulatory Commn., 857 F.3d 388, 393 [D.C. Cir.2017] ).

Critically, however, the CWA provides that "[n]o license or permit shall be granted if [a WQC] has been denied by the State" ( 33 U.S.C. § 1341 [a] [1] ). It therefore follows that, given the requirements of both the NGA ( 15 U.S.C. § 717f [e] ) and the CWA ( 33 U.S.C. § 1341 [a] [1] ), the FERC must condition the construction of an interstate natural gas pipeline upon the issuance of a WQC by each affected State (see Delaware Riverkeeper Network, 857 F.3d at 397–399 ; see generally Islander E. Pipeline Co., LLC, 482 F.3d at 84 ). Indeed, the DC Circuit has strongly implied that the FERC's failure to impose such a condition would effectively render the certificate void (see Delaware Riverkeeper Network, 857 F.3d at 399 ).

B. State Eminent Domain Law

When a "corporation is unable to agree for the purchase of any real property required for the [construction of a pipeline], it shall have the right to acquire title thereto by condemnation" ( Transportation Corporations Law § 83 ; see generally Iroquois Gas Corp. v. Jurek, 30 A.D.2d 83, 84–89, 290 N.Y.S.2d 140 [4th Dept. 1968] ).¹

88 N.Y.S.3d 309

A "two-step process" for any such condemnation is set out in the Eminent Domain Procedure Law ( Matter of City of New York [Grand Lafayette Props. LLC], 6 N.Y.3d 540, 543, 814 N.Y.S.2d 592, 847 N.E.2d 1166 [2006] ). "First, under EDPL article 2, the condemnor must make a determination to condemn the property either by using the hearing and findings procedures of EDPL 203 and 204 or by following an alternative procedure permitted by EDPL 206" ( id. ). "Second, pursuant to EDPL article 4, the condemnor must seek the transfer of title to the property by commencing a judicial proceeding known as a vesting proceeding" ( id. ). When a condemnor invokes an alternative procedure authorized by EDPL 206 (i.e., an exemption from the standard condemnation procedure of EDPL 203 and 204 ), the condemnee may obtain judicial review of the condemnor's entitlement to an EDPL 206 exemption by raising the issue in its answer to the condemnor's EDPL article 4 vesting petition (see Matter of Rockland County Sewer Dist. No. 1 v. J. & J. Dodge, 213 A.D.2d 409, 410, 635 N.Y.S.2d 233 [2d Dept. 1995] ; Matter of Town of Coxsackie v. Dernier, 105 A.D.2d 966, 966–967, 482 N.Y.S.2d 106 [3d Dept. 1984] ; see e.g. Matter of Eagle Cr. Land Resources, LLC v. Woodstone Lake Dev., LLC, 108 A.D.3d 71, 74–78, 964 N.Y.S.2d 743 [3d Dept. 2013] ; Matter of Sanitation Garage Brooklyn Dists. 3 & 3A, 32 A.D.3d 1031, 1034–1035, 822 N.Y.S.2d 97 [2d Dept. 2006], lv denied 7 N.Y.3d 921, 827 N.Y.S.2d 686, 860 N.E.2d 988 [2006] ).

"The main purpose of article 2 of the EDPL" — the first step of the eminent domain process — "is to ensure that an appropriate public purpose underlies any condemnation" ( City of New York, 6 N.Y.3d at 546, 814 N.Y.S.2d 592, 847 N.E.2d 1166 ; see EDPL 204[B] [enumerating factors relevant to the public purpose inquiry] ). The alternative procedures permitted by EDPL 206 are not designed to obviate the condemnor's obligation to demonstrate that the condemned land will be put to public use. Nor could they, for the existence of a "public use" for condemned property is indispensable to any constitutional exercise of the eminent domain power ( N.Y. Const., art. I, § 7 [a]; see generally Matter of Goldstein v. New York State Urban Dev. Corp., 13 N.Y.3d 511, 546–552, 893 N.Y.S.2d 472, 921 N.E.2d 164 [2009, Smith, J., dissenting] [discussing background and history of the "public use" requirement in the State Constitution's eminent domain clause] ). Rather, the alternative procedures permitted by EDPL 206 simply allow the condemnor to make its public purpose showing in a different forum.

The alternative procedure relevant to this case is set forth in EDPL 206(A). Under that provision, a condemnor is deemed "exempt from compliance from the provisions of [EDPL article 2]" when "pursuant to ... federal ... law or regulation

88 N.Y.S.3d 310

it considers and submits factors similar to those enumerated in [ EDPL 204(B) ] to a ... federal agency, board or commission ... and obtains a license, a permit, a certificate of public convenience or necessity or other similar approval from such agency, board or commission" ( EDPL 206[A] ). By virtue of this exemption, the condemnor can bypass...