Alliance Pipeline L.P. v. 4.360 Acres of Land ( 2014 )

United States Court of Appeals
For the Eighth Circuit
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No. 13-1003
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Alliance Pipeline L.P.
lllllllllllllllllllll Plaintiff - Appellee
v.
4.360 Acres of Land, More or Less, in the S/2 of Section 29, Township 163 North,
Range 85 West, Renville County, North Dakota; 4.675 Acres of Land, More or
Less, in the SE/4 of Section 30, Township 163 North, Range 85 West, Renville
County, North Dakota; Leonard Smith; Ione Smith
lllllllllllllllllllll Defendants - Appellants
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Appeal from United States District Court
for the District of North Dakota - Bismarck
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Submitted: December 17, 2013
Filed: March 24, 2014
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Before WOLLMAN, LOKEN, and KELLY, Circuit Judges.
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WOLLMAN, Circuit Judge.
Leonard and Ione Smith (the Smiths) appeal from a district court1 order
condemning portions of their property for the construction of a natural gas pipeline
owned and operated by Alliance Pipeline, L.P. (Alliance), and granting Alliance
immediate use and possession of the condemned land. Alliance brought the
condemnation action against the Smiths’ property after obtaining a certificate from
the Federal Energy Regulatory Commission (FERC) authorizing Alliance to condemn
land along the route of its proposed pipeline. The Smiths assert that Alliance’s
certificate is ineffective against them because Alliance failed to provide the Smiths
with notice of its application for the certificate and because FERC failed to consider
relevant state law in granting the certificate. The Smiths also assert that Alliance’s
condemnation action runs afoul of state and federal procedural law. We affirm.
I.
Alliance operates an approximately 2300-mile network of oil and natural gas
pipelines in the United States and Canada. In 2011, Alliance began plans to construct
a 79-mile-long underground pipeline from a natural gas processing plant near Tioga,
North Dakota, to an interconnection with Alliance’s main pipeline near Sherwood,
North Dakota. There was at that time (and there continues to be) an oil boom in
North Dakota, and occasionally oil prospectors would find reservoirs containing both
petroleum and natural gas. The oil companies, having no pipeline capacity to ship the
gas to major markets, would burn the gas at the source—a practice called “flaring.”
Alliance sought to take advantage of this market inefficiency by shipping the
otherwise wasted gas east to Chicago.
Anyone who wishes to construct a natural gas pipeline in the United States
must first obtain a certificate of public convenience and necessity from FERC, the
1
The Honorable Daniel L. Hovland, United States District Judge for the District
of North Dakota.
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federal agency responsible for supervising and coordinating the production of energy
in the United States. See 15 U.S.C. § 717f(c)-(e). Such a certificate also gives the
recipient the authority to condemn land along the route of its pipeline under the
power of eminent domain. See 15 U.S.C. § 717f(h). Alliance applied to FERC for
a certificate of public convenience and necessity on January 25, 2012. FERC
published notice of Alliance’s application in the Federal Register on February 7,
2012.
The Smiths are an elderly couple who own a farm near Sherwood, North
Dakota. The route of Alliance’s proposed pipeline crossed the Smiths’ property.
Sometime in February 2012, Alliance representatives visited the Smiths’ farm to ask
the Smiths if Alliance could purchase an easement across their land. Because the
Smiths were in poor health, Alliance representatives met with Guy Solemsaas, the son
of Ione and stepson of Leonard, who lives next to the Smiths and helps tend the
Smiths’ farm. Solemsaas told Alliance that neither he nor the Smiths were interested
in negotiating the sale of an easement across the Smiths’ land.
On April 13, 2012, Alliance representatives visited the Smiths again, this time
to serve them with a state-court summons and petition to enter and survey their
property. Alliance asserted that it needed access to the Smiths’ property to complete
various field surveys required as part of its FERC application. The state court granted
Alliance’s petition on May 15, 2012.
On September 20, 2012, FERC granted Alliance a certificate of public
convenience and necessity, and on October 16, 2012, Alliance brought a
condemnation action against two parcels of land owned by the Smiths. Alliance
moved for summary judgment and for immediate use and possession of the Smiths’
land. The district court granted both motions. See D. Ct. Order of Nov. 26, 2012.
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II.
We review the district court’s grant of summary judgment de novo, viewing the
evidence in the light most favorable to the nonmoving party. Hill v. Walker, 737 F.3d
1209, 1216 (8th Cir. 2013). Summary judgment is appropriate when there is “no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). In challenging the district court’s grant of
summary judgment to Alliance, the Smiths attack both Alliance’s FERC certificate
and the procedural propriety of Alliance’s subsequent condemnation action. We
address each challenge in turn.
A.
We begin with the Smiths’ challenge to the FERC certificate, which is twofold.
First, the Smiths assert that Alliance failed to provide them notice of its FERC
application as required by both the Due Process Clause of the Fifth Amendment and
FERC’s own landowner notice requirements, set forth in 18 C.F.R. § 157.6(d).
Second, the Smiths assert that FERC failed to consider state criteria for the siting of
pipelines in approving Alliance’s application. These criteria are set forth in North
Dakota Administrative Code (NDAC) § 69-06-08-01.
We conclude that we lack jurisdiction to consider the Smiths’ statutory
challenges (in other words, the challenges based on 18 C.F.R. § 157.6(d) and NDAC
§ 69-06-08-01).
When Congress prescribes specific procedures for the review of an
administrative order, courts outside the statutory review framework are precluded
from hearing challenges to that order. See City of Tacoma v. Taxpayers of Tacoma,
357 U.S. 320, 336 (1958). Section 19 of the Natural Gas Act, 15 U.S.C. § 717r(a)-
(b), sets forth specific procedures for challenging a FERC order:
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(a) Any person, state, municipality, or State commission aggrieved by
an order issued by the Commission in a proceeding under this chapter
to which such person, State, municipality, or State commission is a party
may apply for a rehearing within thirty days after the issuance of such
order. . . . 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. . . .
(b) Any party to a proceeding under this chapter aggrieved by an order
issued by the Commission in such proceeding may obtain a review of
such order in the court of appeals of the United States . . . by filing in
such court, within sixty days after the order of the Commission upon the
application for rehearing, a written petition praying that the order of the
Commission be modified or set aside in whole or in part. . . . Upon 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.
Section 19 thus requires that any challenge to a FERC order first be brought before
FERC itself in a petition for rehearing within thirty days of the order’s issuance. If,
after rehearing, a party aggrieved by the order remains unsatisfied, that party may
seek further review by appealing directly to a United States court of appeals within
sixty days of FERC’s decision on rehearing.
“As the statutory language plainly states, the special judicial review provisions
of § 19 are exclusive.” Williams Natural Gas Co. v. City of Oklahoma City, 890 F.2d
255, 261 (10th Cir. 1989). By collaterally attacking the FERC order in this
condemnation proceeding, the Smiths seek to circumvent this exclusive review
scheme.
We need not determine whether § 19 would permit us to exercise jurisdiction
over the Smiths’ claim that Alliance denied them due process of law by failing to
provide them with advance notice of its FERC application. Assuming that such
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notice is constitutionally required, we conclude that the Smiths received notice
“reasonably calculated . . . to apprise” them of Alliance’s FERC application. Mullane
v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). In February 2012,
Alliance visited the Smiths’ farm to negotiate the purchase of an easement across the
Smiths’ land for the construction of its pipeline. On April 13, 2012, Alliance filed
a state court action to enter and survey the Smiths’ property for purposes of its FERC
application. And on October 16, 2012, Alliance brought this condemnation action
against the Smiths’ property. All three of these events occurred before the expiration
of the thirty-day rehearing period provided by § 19, and all three occurred after or
around the time FERC published notice of Alliance’s application in the Federal
Register. Perhaps the Smiths, as an elderly couple in rural North Dakota, should not
be charged with notice of the Federal Register. But their counsel in the state-court
proceeding to enter and survey their land (who also represents the Smiths in this
proceeding) can claim no such lack of notice. Taken together, these events gave the
Smiths reasonable notice that Alliance was applying to FERC for the right to
condemn the Smiths’ land.
B.
The Smiths’ challenges to Alliance’s FERC certificate now aside, we turn next
to the Smiths’ allegation that Alliance violated several state procedural rules in
bringing this condemnation action. The Smiths refer us specifically to North Dakota
Century Code (NDCC) § 32-15-06(1), which imposes a duty upon the condemnor to
negotiate with a condemnee prior to bringing a condemnation action; NDCC § 31-15-
06(2)-(4), which govern appraisals and compensation in a condemnation proceeding;
and NDCC § 32-15-22, which provides that a jury shall determine the value of
condemned property based on a set of enumerated criteria. As we explain below,
Federal Rule of Civil Procedure 71.1 preempts all of these state procedures.
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In support of their premise that state law is relevant in this federal
condemnation proceeding, the Smiths cite 15 U.S.C. § 717f(h), which provides that
“[t]he practice and procedure [in a condemnation proceeding under this section] shall
conform as nearly as may be with the practice and procedure in similar action or
proceeding in the courts of the State where the property is situated[.]” According to
the Smiths, § 717f(h) requires a party who brings a condemnation action pursuant to
a FERC certificate to comply with relevant state procedural law in bringing that
action.
As several other courts have observed, however, § 717f(h)’s state-law directive
has been superseded. See N. Border Pipeline Co. v. 64.111 Acres of Land in Will
Cnty., Ill., 344 F.3d 693, 694 (7th Cir. 2003); S. Natural Gas Co. v. Land, Cullman
Cnty., 197 F.3d 1368, 1372-73 (11th Cir. 1999). Congress amended § 717f to include
subsection (h) in 1947. See Pub. L. No. 80-245, 61 Stat. 459 (1947). At that time,
the Federal Rules of Civil Procedure did not provide a specific framework for
initiating a condemnation action. In 1951, the Supreme Court adopted Rule 71A
(later renumbered 71.1), which “govern[s] proceedings to condemn real and personal
property by eminent domain[.]” The advisory committee notes to Rule 71.1 state that
the rule “affords a uniform procedure for all cases of condemnation invoking the
national power of eminent domain” and “supplants all statutes prescribing a different
procedure.” And Congress has provided directly that “[a]ll laws in conflict with [the
Federal Rules of Civil Procedure] shall be of no further force or effect after such rules
have taken effect.” 28 U.S.C. § 2072(b). Thus, Rule 71.1 displaces state procedural
law in this condemnation proceeding.
The Smiths assert that the jury requirement set forth in NDCC § 32-15-22
cannot be preempted by federal statute or rule because it vindicates their Seventh
Amendment right to a jury trial. But “there is no constitutional right to a jury in
eminent domain proceedings.” United States v. Reynolds, 397 U.S. 14, 18 (1970).
The Smiths also argue that Alliance’s invocation of state law in its state-court petition
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to enter and survey the Smiths’ property estops Alliance from arguing in this
condemnation action that state law does not apply. But as the Smiths acknowledge,
there is no federal law that deals specifically with entries to survey property, so there
is nothing to preempt state law in such a proceeding. Accordingly, Alliance’s
invocation of state law in its state court action for entry to survey does not necessitate
the application of state law in this case.
C.
Finally, the Smiths assert that Alliance violated the Natural Gas Act, 15 U.S.C.
§ 717f(h), by failing to negotiate with them in good faith before bringing this
condemnation action. The Natural Gas Act itself does not mention good-faith
negotiation. See id. Rather, the Act simply states:
When any holder of a certificate of public convenience and necessity
cannot acquire by contract, or is unable to agree with the owner of
property to the compensation to be paid for, the necessary right-of-way
to construct, operate, and maintain a pipe line or pipe lines for the
transportation of natural gas, and the necessary land or other property,
in addition to right-of-way . . . it may acquire the same by the exercise
of the right of eminent domain in the district court of the United States
for the district in which such property may be located, or in the State
courts.
Id. Courts are split as to whether § 717f(h) contains an implied requirement of good-
faith negotiation. Compare USG Pipeline Co. v. 1.74 Acres in Marion Cnty., Tenn.,
1 F. Supp. 2d 816, 822 (E.D. Tenn. 1998), and Kern River Ga. Transmission Co. v.
Clark County., Nev., 757 F. Supp. 1110, 1113 (D. Nev. 1990), with Maritimes & Ne.
Pipeline, L.L.C. v. Decoulos, 146 F. App’x 495, 498 (1st Cir. 2005) (per curiam).
Even if § 717f(h) does contain an implied covenant of good faith, however, Alliance
has abided by this covenant. Alliance made the Smiths an offer for an easement
across their land and showed the Smiths how it had calculated its offer, and it does
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not appear that the Smiths ever made Alliance a counteroffer or attempted to
negotiate with Alliance, even after Alliance’s attempts to follow up with the Smiths.
Moreover, the fact that Alliance was able to purchase easements from 90% of the
affected landowners suggests that most landowners found Alliance’s damages
calculations to be reasonable. We conclude, therefore, that Alliance has satisfied any
duty to negotiate with the Smiths in good faith.
III.
Lastly, we address the Smiths’ argument that the district court erred in granting
Alliance immediate use and possession of their land. We review this exercise of the
district court’s inherent equitable powers for abuse of discretion. See eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388, 391 (2006).
The considerations that attend a motion for immediate use and possession are
similar to those that attend a motion for a preliminary injunction. See N. Border
Pipeline Co. v. 86.72 Acres of Land, 144 F.3d 469, 471-72 (7th Cir. 1998); see also
Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (“Whether
a preliminary injunction should issue involves consideration of (1) the threat of
irreparable harm to the movant; (2) the state of the balance between this harm and the
injury that granting the injunction will inflict on other parties litigant; (3) the
probability that movant will succeed on the merits; and (4) the public interest.”).
The court below determined that Alliance’s pipeline would “fill a critical need”
for the transportation of natural gas and that a delay in access to the Smiths’ land
could cost Alliance as much as $540,000 per day. See D. Ct. Order of Nov. 26, 2012,
at 17. The court also found that Alliance had convincingly demonstrated its right to
condemn the Smiths’ property and that any prejudice to the Smiths could be offset by
the $3,000 per acre that Alliance had agreed to deposit with the clerk of court. The
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district court thus considered all four of the Dataphase factors in issuing its
injunction.
The Smiths’ attack on the district court’s findings focuses primarily on
Alliance’s right to condemn the Smiths’ property—the “success on the merits” prong
of the Dataphase analysis. In support of this challenge, the Smiths renew many of
their previous arguments. The Smiths allege, for instance, that Alliance did not
provide them notice of the FERC proceeding, did not negotiate in good faith before
bringing this condemnation action, and failed to comply with state law in initiating
the condemnation action. Our conclusions above foreclose these arguments. If there
was any doubt that Alliance had the right to condemn the Smiths’ property, that doubt
has now been resolved.
The remainder of the Smiths’ challenges to the district court’s finding consist
of unsupported allegations that Alliance will not suffer irreparable harm if not granted
immediate use and possession of their land. The Smiths assert, for example, that the
affidavit of one of Alliance’s employees was based on hearsay and that some of the
harm to Alliance could have been avoided had Alliance waited until securing
regulatory approval to negotiate shipping contracts. None of these allegations are
sufficient to support a finding that the district court abused its discretion in holding
that Alliance was entitled to immediate use and possession.
IV.
The judgment is affirmed.
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