Court: Court of Appeals for the Fourth Circuit; February 5, 2019; Federal Appellate Court
In October 2017, the Federal Energy Regulatory Commission (FERC) granted Mountain Valley Pipeline, LLC, approval to construct a 303.5-mile natural gas pipeline through West Virginia and Virginia, requiring access to numerous private properties via eminent domain for easements where private agreements were insufficient. Mountain Valley negotiated easements with most landowners but initiated condemnation proceedings for the remaining properties. Three district courts affirmed Mountain Valley's right to take these easements and issued preliminary injunctions for immediate possession to facilitate construction while determining just compensation, which would take years. The courts mandated that Mountain Valley post deposits for landowners to draw from during the proceedings. The landowners did not contest the partial summary judgment, agreeing on Mountain Valley's right to eminent domain; the sole issue on appeal was whether immediate access to the easements was permissible. The court upheld the district courts' decision, affirming the injunctions. In its review process, FERC received extensive public input and ultimately determined the project served public interest and market demand, issuing a "certificate of public convenience and necessity" with conditions, including a completion deadline of October 2020. Legal challenges to the certificate must first be reheard by FERC before proceeding to a federal appellate court, and previous challenges to the certificate by various parties have not succeeded.
In November 2017, intervenors sought a rehearing and a stay of the Certificate from the Commission, which was denied. Concurrently, three petitions for review and stay were filed with the D.C. Circuit, which also denied the stay requests, allowing the Certificate to remain effective during ongoing legal challenges, as per 15 U.S.C. § 717r(c). By late November 2017, Mountain Valley had entered into three construction agreements to begin pipeline construction by February 2018, aiming for completion by December 2018, ahead of the Commission's October 2020 deadline. However, tree-clearing for protected bats needed to occur in winter; any delays could push the start date to November 2018. Mountain Valley had a contingency plan to still meet the Commission’s deadline.
Mountain Valley secured rights-of-way for about 85% of the pipeline route but could not reach agreements with numerous landowners involved in the litigation. Under the Natural Gas Act, the Certificate allows Mountain Valley to exercise eminent domain to obtain necessary rights-of-way. Consequently, Mountain Valley initiated condemnation proceedings in three district courts for a 50-foot-wide path along the pipeline. Each court granted partial summary judgment, affirming Mountain Valley's legal right to acquire easements by eminent domain, regardless of ongoing legal challenges. The courts clarified that only FERC or a relevant court of appeals can stay enforcement of a Commission certificate. However, the process for eminent domain could exceed three years, potentially delaying the project beyond the Commission's in-service deadline of October 2020 as compensation for easements was determined.
Mountain Valley's motions for preliminary injunctions were granted by the district courts, allowing immediate access to easements while eminent domain proceedings were ongoing. The courts applied the four-pronged test from Winter v. Natural Resources Defense Council, which requires establishing likelihood of success on the merits, irreparable harm, balance of equities, and public interest. The first prong was satisfied as courts had already affirmed Mountain Valley's right to condemn landowner property interests. For irreparable harm, the courts found that delaying construction would hinder Mountain Valley's ability to meet an October 2020 deadline, leading to significant financial losses that could not be recovered. Although the Landowners suggested delaying relief until November 2018 to align with bat-conservation regulations, the courts determined this would cause substantial economic harm to Mountain Valley. The balance of equities favored Mountain Valley as the harms claimed by the Landowners stemmed from the eminent domain exercise itself, not the injunction. On public interest, the courts relied on the FERC Certificate, asserting that the pipeline's construction aligns with public needs for natural gas, and dismissed the Landowners' environmental concerns as challenges to FERC's authority. The courts emphasized that any disputes regarding the FERC certificate must follow the statutory process and cannot be contested through condemnation proceedings.
Mountain Valley was granted immediate possession of easements by district courts, which determined it met the Winter preliminary injunction standard. The courts acknowledged the Landowners' right to "reasonable, certain, and adequate provision" for just compensation during condemnation proceedings, requiring Mountain Valley to deposit an amount significantly exceeding each easement's estimated value. This fund would allow Landowners to draw up to the estimated value of their respective easements. Additionally, Mountain Valley was ordered to post a surety bond double the estimated value of the easements to ensure compensation at the proceedings' conclusion.
While the Landowners did not appeal the partial summary judgment affirming Mountain Valley's right to exercise eminent domain under 15 U.S.C. § 717f(h), they contested the preliminary injunctions that allowed Mountain Valley immediate possession before compensation was determined. The review of the injunction's issuance is based on an abuse of discretion standard, allowing reversal only for clear factual errors or legal mistakes.
The Landowners argue that federal courts lack authority to grant immediate possession before determining and paying just compensation, asserting that access to easements should only follow the completion of eminent domain proceedings. However, they acknowledged that the Constitution does not prohibit such possession prior to compensation, referencing the Supreme Court's ruling in Cherokee Nation, which clarified that as long as fair compensation is assured, constitutional standards are satisfied.
District courts adhered to the Cherokee Nation precedent, ensuring adequate protections for Landowners to receive just compensation. The Landowners did not contest that deposits and bonds met this standard but argued against the statutory authority for "take-first, pay-later" condemnations under the Natural Gas Act, claiming possession should only follow compensation determination. They asserted that the Act's silence on immediate possession precluded such actions via preliminary injunction. However, the court reaffirmed its previous ruling in East Tennessee Natural Gas Co. v. Sage, allowing immediate possession of property along an approved pipeline route before compensation payment, based on established eminent domain rights. The district court invoked equitable authority to grant a preliminary injunction to prevent construction delays, countering Landowners' claims of lacking authority for immediate possession. The court emphasized that Rule 65(a) allows for preliminary injunctions once a gas company proves its eminent domain right, with sufficient safeguards for Landowners. The requirement for the gas company to deposit an amount equal to the easements' appraised value satisfied the Cherokee Nation standard, ensuring Landowners could pursue a trespass action if the compensation was inadequate. This case mirrors Sage, with the gas company having established rights and enhanced protective measures for the Landowners, including a deposit significantly exceeding the easements' estimated value, minimizing the likelihood of needing to resort to trespass actions.
The Landowners acknowledge that the case is governed by the precedent set in *Sage*, but contend that *Sage* was improperly decided and sought an en banc review, which the court denied. As a result, the court remains obligated to adhere to *Sage*, which establishes that district courts have the authority to grant immediate possession in Natural Gas Act condemnations. The primary issue for the panel is whether the district courts abused their discretion in issuing preliminary injunctions under the *Winter* standard.
*Sage* confirms that a gas company with a valid FERC certificate may receive immediate possession and that such companies can meet the conditions for preliminary relief. The court found that success on the merits was guaranteed since the district court had already ruled that the gas company had the right to condemn the landowners' property. The court also supported the finding that the gas company would face irreparable harm without preliminary relief due to potential contract breaches and financial repercussions arising from delays in meeting FERC deadlines. In contrast, the Landowners failed to demonstrate any specific harm from preliminary relief, as their land's productive capacity would be similarly impacted regardless of when compensation was determined.
The FERC certificate was deemed sufficient to establish that the pipeline project served the public interest, with delays in construction delaying the benefits identified by FERC. Since the decision in *Sage*, several courts have granted similar preliminary injunctions. The review of the district courts' injunctions applied the *Winter* four-pronged test, leading to the conclusion that there was no abuse of discretion. The likelihood of success on the merits was affirmed, as the district courts had already granted partial summary judgment in favor of the gas company, which the Landowners did not contest on appeal.
Mountain Valley is entitled to take easements across the contested properties, ensuring a strong likelihood of success on the merits in this preliminary injunction case. The district courts found that Mountain Valley would face irreparable harm without these injunctions, meeting the necessary legal standard that requires a "clear showing" of actual and imminent harm. Specifically, the inability to meet the Federal Energy Regulatory Commission's (FERC) October 2020 deadline for pipeline construction was emphasized, as the construction process is intricate and sequential, with specific segments needing completion before others can start. The courts noted the time-consuming nature of determining just compensation for the affected land, which could extend beyond the FERC deadline, risking Mountain Valley's right to construct the pipeline entirely—a situation deemed irreparable harm.
In contrast, the Landowners suggested a narrower analysis, advocating for a nine-month delay in granting the preliminary injunction until the tree-clearing window reopened, arguing that Mountain Valley could still meet the deadline. This approach assumed that injunctions should be issued only when absolutely necessary and relied on the company's ability to expedite construction. However, the district courts identified additional irreparable injury, highlighting significant financial losses Mountain Valley would incur if access were delayed. Evidence presented included potential monthly revenue losses of $40 to $50 million, $200 million in penalties for breaching construction contracts, and $40 to $45 million in additional carrying costs.
District courts rigorously evaluated the alleged losses, with some evidence indicating that the claimed damages might be lower or subject to mitigation. Despite this, the courts determined that sufficient grounds for irreparable harm existed under Sage, which recognized the potential for missing FERC deadlines and increased construction costs as forms of irreparable injury. The Landowners challenged this conclusion, arguing that economic losses should not be considered irreparable unless they threaten a party's existence. However, the district courts and the appellate court rejected this assertion, stating that anticipated economic losses are generally not irreparable unless they are non-recoverable and could lead to permanent harm. In this case, Mountain Valley’s losses, stemming from its inability to access condemned easements, are not recoverable in any litigation, thereby justifying their classification as irreparable harm. The courts emphasized that the typical presumption against treating economic losses as irreparable does not apply here, as the unique circumstances of this case allow for such treatment. The decision aligns with precedent that acknowledges prospective economic injuries from pipeline construction delays as irreparable.
Sage's precedent has been supported by subsequent cases that recognize unrecoverable financial harms to gas companies as grounds for claiming irreparable injury, which justifies immediate access to condemned properties. For instance, cases like All. Pipeline L.P. and Transcon. Gas Pipe Line Co. identified irreparable harm due to construction delays and associated costs. Courts have consistently held that undue delay and financial burdens meet the irreparable harm requirement. The Landowners' argument that Mountain Valley's financial losses stem from its voluntary early contractual commitments was rejected. The district courts maintained that these contracts resulted from FERC's regulatory framework, which necessitates such arrangements for compliance with strict service deadlines. Therefore, the decision to enter these contracts was deemed reasonable and not self-inflicted in a relevant sense. The district courts also evaluated the balance of equities, concluding that any harm to the Landowners would be consistent regardless of whether access to the land was granted before or after compensation was paid, thereby favoring Mountain Valley’s request for a preliminary injunction.
No error was found in the courts' reasoning regarding the Landowners' claims of property damage due to Mountain Valley's pipeline construction. The injuries cited by the Landowners, including property damage and harm to water sources, would occur regardless of whether compensation is provided before or after the easement is taken, as the harm stems from the pipeline construction itself, not the preliminary relief granted. The Natural Gas Act and the FERC Certificate are identified as the sources of the Landowners' injuries, and delaying access for just compensation would not mitigate these issues. Just compensation, as guaranteed by the Fifth Amendment, remains the same regardless of the timing of the taking.
The Landowners argued that the process of determining just compensation would be lengthy, leading to earlier disturbances of their property. However, this concern was deemed more of a timing argument rather than an independent injury. The rights of landowners to access court-ordered deposits during condemnation proceedings were highlighted as a means to offset harm from early property loss.
While a few Landowners testified to specific harms from immediate possession, the district courts found that the potential harms to Mountain Valley from delaying the project outweighed these concerns. The courts exercised discretion in favor of Mountain Valley, noting that the Southern District of West Virginia misinterpreted the legal standard set in Sage, which does not mandate a finding favoring pipeline interests in condemnation actions under the Natural Gas Act.
The Fourth Circuit clarified that in Natural Gas Act condemnation actions, district courts must evaluate the specific harms presented by landowners when considering preliminary injunctions, without being bound by precedent favoring the pipeline company. While outcomes may often favor the pipeline, they are not automatic; the courts must scrutinize evidence of harm to landowners against potential harm to the pipeline. In the reviewed cases from West Virginia, the courts found no evidence that landowners would suffer harm from the injunction that outweighed the harm to Mountain Valley without it. The landowners' argument regarding potential future injuries from ongoing legal challenges to the FERC certificate was dismissed, as district courts lack authority to stay condemnation proceedings based on such challenges. Thus, any harms stemming from ongoing litigation do not prevent granting immediate possession to Mountain Valley. Furthermore, the district courts reasonably concluded that preliminary injunctions served the public interest by facilitating the construction of a FERC-approved pipeline, which is deemed beneficial for providing a reliable natural gas supply at reasonable prices. The courts did not abuse their discretion in applying existing legal standards to these cases, despite landowners' disagreement with FERC's findings.
A dissenting FERC commissioner's opinion was presented before district courts, arguing that the pipeline's construction should be blocked due to environmental hazards and potential impacts on historical areas. The courts clarified that such challenges to the Certificate must be directed to the Commission and subsequently to the appropriate appellate court, rather than through a collateral attack in a condemnation proceeding. The courts emphasized that FERC had already considered and dismissed these concerns in its Certificate Order. They affirmed FERC's determination that the project serves the public need for natural gas, rejecting requests for second-guessing FERC's analysis.
While a FERC certificate does not alone establish public interest for immediate possession, the district courts concluded that delaying construction would hinder the public benefits identified by FERC, thus favoring preliminary relief. The courts recognized that timely completion of the project aligns with the public interest, and although there may be cases where public interest arguments against immediate possession exist, this case did not present such circumstances. The Landowners' arguments regarding constitutional rights and environmental protection were deemed general challenges to the project rather than specific to immediate possession, echoing issues previously rejected by FERC. Consequently, the courts found no abuse of discretion in granting preliminary injunctive relief to Mountain Valley, affirming the district courts' decisions. FERC denied rehearing requests in June 2018, leading to multiple petitions for review in the D.C. Circuit, which denied further stay requests, and those cases remain ongoing.
In the case Energy Reg. Comm'n. No. 17-1271, the term "Landowners" refers generally to all landowners involved in the consolidated appeal, but specifically denotes the defendant landowners in individual district court cases. Three district court opinions were issued: one published from the Northern District of West Virginia (N.D.W. Va. Opinion) and two unpublished opinions from the Western (W.D. Va. Opinion) and Southern Districts of West Virginia (S.D.W. Va. Opinion). The appraisal values for easements varied from $3,001 to six figures, with the lower figure reflecting the jurisdictional threshold under the National Gas Act. Two district courts mandated deposits of three times the easement's appraisal value, while the third required four times the value.
The Landowners contend that the decision in Sage created a circuit split with the Seventh Circuit's Northern Border Pipeline case, which ruled against the authority to grant immediate possession via preliminary injunctions without a condemnation order. However, Mountain Valley Pipeline had obtained such orders, distinguishing it from Northern Border. The standard for issuing preliminary injunctions was recalibrated after Winter, which requires satisfaction of all four prongs of the standard without a sliding scale; however, Sage's analysis of these prongs remains relevant. The S.D.W. Va. Opinion did not differentiate between general public interest in pipeline construction and specific immediate access, yet it aligned with the reasoning from Sage regarding public interest and recognized the similarities with prior district court rulings. The S.D.W. Va. Opinion concluded that the lack of deeper analysis on the public-interest prong did not constitute an abuse of discretion.
