Supreme Court Seems Skeptical of Property Owners in Natural Gas Pipeline Case

The results in Hoffman v. WBI Energy Transmission look doubtful for the property rights side.

The U.S. Supreme Court heard oral arguments this week in a case that asks whether property owners whose land was taken for an interstate natural gas pipeline should be able to vindicate their right to just compensation for the taken property under state law, which offers more protections in this instance than federal law does. Unfortunately for the property owners, a majority of the justices seemed ready to doom their cause.

The case is Hoffman v. WBI Energy Transmission. Representing the property owners at the lectern on Monday was Robert J. McNamara, deputy litigation director at the Institute for Justice, a national public-interest law firm. "The Natural Gas Act authorizes private companies to ask courts to order the forced sale of private property, but it says nothing about the substantive law those courts should use to determine what that property is worth," he observed. "That silence matters because, on its own, authorizing companies to file condemnations does nothing to preempt state laws defining the measure of compensation."

McNamara acknowledged that state law "wouldn't apply to the United States if it took land in its own name." But in this case the land was taken by a private company acting under delegated federal authority, and "nothing in the statute extends the United States' sovereign immunity to private companies, and that means they don't have it."

But that argument was swiftly questioned by Justice Clarence Thomas, who is normally more receptive towards property rights arguments. "If the U.S. delegates its power, its authority to—of eminent domain, you're saying that it brings with it state law trappings of just compensation?"

Chief Justice John Roberts soon added his voice to the chorus of disapproval. "I don't understand why this isn't an easy case," Roberts told McNamara. If the federal government has the power to take the land without facing the additional compensation rules imposed by state law, why shouldn't the government's private-sector partner enjoy the same sort of federal privileges?

"It doesn't take much to avoid your position," Roberts asserted, "and it seems to me it's just a more efficient process to have a private developer get the land under the same terms as the federal government without having to pay the attorneys' fees that the state wants to insist on."

I must say that I find McNamara's argument to be much stronger than Roberts or Thomas seemed to find it. If we're supposed to view a private company acting with delegated federal authority as a total proxy for the federal government, is it really too much to ask that federal law make this grant of proxy power clear and unambiguous? Why should any textual absence or uncertainty around this delegation of federal authority cut in favor of the private company rather than in favor of the affected property owners? The point of the Just Compensation Clause is to cabin the government's eminent domain power, not to loosen it.

But that seemed to be a minority view at SCOTUS this week. Judging by the oral arguments, the property owners may be headed for defeat.