The Oil and Gas Addendum

In a February 7, 2025 decision in Simon v. Sunoco Pipeline LP, No. 2015-3302 (Wash. Cty. February 7, 2025), the Court of Common Pleas of Washington County, Pennsylvania concluded that Sunoco Pipeline LP and Sunoco Logistics Partners LP (collectively, “Sunoco”) did not have eminent domain authority in 2013 associated with the Mariner East pipeline project. This decision could have substantial impacts on landowners and serves as a reminder that landowners should ensure that companies seeking property rights actually have the powers that they may claim to have.

The Simon v. Sunoco lawsuit arose from a 2013 right of way agreement that Washington County, Pennsylvania landowners executed in favor of Sunoco. That right of way was related to Sunoco’s Mariner East pipeline project. That pipeline project traverses the length of Pennsylvania, from Houston, in Washington County, to Marcus Hook, outside of Philadelphia. The Mariner East pipelines transport natural gas liquids from western Pennsylvania to the eastern side of the state.

In their lawsuit, the landowners alleged that they signed the pipeline right of way with Sunoco over the landowners’ Washington County property in 2013 because Sunoco represented that it had eminent domain authority and the landowners believed that exercise of that eminent domain authority was imminent. The landowners contended that after they signed their pipeline right of way agreement, they learned that Sunoco did not have eminent domain authority.

In the summer of 2024, the parties to the lawsuit moved for summary judgment. Addressing those competing motions, the Court of Common Pleas observed a common theme. It wrote that “[c]entral to this matter is the issue of whether Sunoco had eminent domain in 2013 when they began negotiations with the Plaintiffs and when the Right of Way Agreement was signed.” Simon at p. 3. The parties’ dueling positions were clear on this front. The landowners argued that “. . . Sunoco did not have the legal authority to exercise eminent domain powers in 2013 in Washington County, Pennsylvania.” Simon at p. 4. For its part, “Sunoco argues that it had eminent domain powers as derived from 15 Pa. C.S. § 1511(a) as the Mariner East Project was subject to regulation by the Federal Energy Regulatory Commission (“FERC”).” Simon at p. 4.

Eminent domain is a “taking” of private property for a public use. The federal government’s eminent domain authority can be found in the Fifth Amendment of the United States Constitution. The Pennsylvania state government’s eminent domain authority is found in Article I, Section 10 of the Pennsylvania Constitution. Legislation at both the state and federal level have granted those governments’ eminent domain powers to certain types of private entities. Whether Sunoco was vested with eminent domain authority in 2013 when it negotiated the pipeline right of way agreement with the landowners was the foundational legal question before the Court of Common Pleas.

The Common Pleas Court observed that “. . . it is undisputed that in 2013 the Mariner East pipeline was an interstate pipeline that provided no service in Pennsylvania. As such, Sunoco has admitted at numerous points in the record that they were regulated by FERC under the Interstate Commerce Act (“ICA”).” Simon at p. 5. And, according to the Washington County Court of Common Pleas, Sunoco acknowledged that it did not have eminent domain powers under federal law. Simon at p 6. That meant that Sunoco’s eminent domain authority for the Mariner East pipeline project in 2013 had to emanate from Pennsylvania state law.

In Pennsylvania, public utility corporations do have eminent domain authority. “Public utility corporations are the types of corporations referred to in Article X, Section 4 of the Pennsylvania Constitution that can be vested with the power of eminent domain if it is exercised for a public purpose.” In re Condemnation by Sunoco Pipeline L.P., 165 A.3d 1044, 1046 (Pa. Commw. Ct. 2017). Section 1511 of Pennsylvania Business Corporation Law (the “BCL”) identifies powers of certain public utility corporations. Its subsection (a) authorizes a “public utility corporation” to “. . . have the right to take, occupy and condemn property for one or more of the following principal purposes . . . (2) The transportation of artificial or natural gas, electricity, petroleum or petroleum products or water or any combination of such substances for the public. (3) The production, generation, manufacture, transmission, storage, distribution or furnishing of natural or artificial gas, electricity, steam, air conditioning or refrigerating service or any combination thereof to or for the public.” 15 Pa.C.S. § 1511(a).

“Jurisdiction over the certification and regulation of public utilities in the Commonwealth is vested in the Public Utility Commission (PUC).” Id. But, “[s]imply being subject to PUC regulation, however, is insufficient for an entity to acquire the power of eminent domain.” Id. at 1047. If a business entity is a “public utility”, it must also possess a certificate of public convenience (CPC) issued by the PUC pursuant to Section 1101 of the [Public Utility] Code, 66 Pa.C.S. § 1101.” In re Condemnation by Sunoco Pipeline LP, at 1046.A public utility must apply to the PUC for the issuance of a CPC, which ‘shall be granted by order of the commission, only if the commission shall find or determine that the granting of such certificate is necessary or proper for the service, accommodation, convenience, or safety of the public.’” Id. citing 66 Pa.C.S. § 1103(a). “Once the PUC approves a CPC, the public utility corporation can begin taking private property by filing a declaration of taking.” Id. at 1048.

In short, “[w]hile the power of eminent domain is conferred on a public utility via a CPC, an entity's authorization to implement its taking power is contained in Section 1511(a) of the Business Corporation Law of 1988.” In re Condemnation by Sunoco Pipeline LP, at 1047. And, “[t]he procedure for a public utility to exercise the power of eminent domain is set forth under Section 1511(c) of the BCL. Id. Although Section 1511(a) of the BCL allows public utility corporations to acquire private property to transport things like natural gas, or petroleum, Subsection 1511(c) states that:

[t]he powers conferred by subsection (a) may be exercised to condemn property outside the limits of any street, highway, water or other public way or place for the purpose of erecting poles or running wires or other aerial electric, intrastate aerial telephone or intrastate aerial telegraph facilities only after the Pennsylvania Public Utility Commission, upon application of the public utility corporation, has found and determined, after notice and opportunity for hearing, that the service to be furnished by the corporation through the exercise of those powers is necessary or proper for the service, accommodation, convenience or safety of the public.

15 Pa.C.S. § 1511(c). That provision was key to the analysis undertaken by the Court of Common Pleas of Washington County.

The Washington County Court rejected Sunoco’s argument that it had eminent domain powers under 15 Pa.C.S. § 1511(a)(2), which vests public utility corporations involved in the “. . . [t]ransportation of artificial or natural gas, electricity, petroleum or petroleum products or water or any combination of such substances for the public.” The Court observed that “. . . 15 Pa.C.S. § 1103 requires that to be a “public utility corporation” under 15 Pa.C.S. § 1511(a)(2), the corporation must be subject to regulation “as a public utility.” Simon at p. 6.” The Court of Common Pleas determined that Sunoco was a “common carrier” in 2013. Simon at p. 5 citing Valvoline Oil Co. v. United States, 308 U.S. 141 (1939). As such, in the Washington County Court’s view, Sunoco was not a public utility and the eminent domain authorization in 15 Pa.C.S. § 1511(a)(2) did not apply. Simon at p. 6.

But, the Court of Common Pleas did not end its analysis with that conclusion. The Court assumed, for the sake of argument, that Sunoco was a public utility corporation under Pennsylvania law, having eminent domain authority pursuant to 15 Pa.C.S. § 1511(a)(2). Even in that instance, however, the Washington County Court found that Sunoco had no ability to exercise eminent domain powers. That is because “. . . Sunoco was not in compliance with 15 Pa.C.S. § 1511(c) which requires approval of the Pennsylvania Public Utility Commission (“PUC”) prior to eminent domain being exercised.” Simon at p. 6. The Court of Common Pleas found that “. . . it is not disputed that Sunoco had no Certificates of Public Convenience (“CPCs”) in relation to Washington County as granted by either FERC or the PUC.” Simon at p.6.

In light of all of this, the Court of Common Pleas found “. . . that Sunoco did not possess eminent domain in Washington County between February 2013 and September 2013.” Simon at p. 6. That conclusion, while likely to be challenged by Sunoco in a potential future appeal, is not surprising that this dispute arose. Indeed, this blog discussed court decisions nearly a decade ago involving eminent domain claims by some gas pipeline companies in Pennsylvania. And, in In re Sunoco Pipeline, L.P., 143 A.3d 1000, 1007 (Pa. Commw. Ct. 2016), the Commonwealth Court observed that “. . . by Order dated August 21, 2014, PUC granted Sunoco's Application for a CPC to expand its service territory into Washington County. (R.R. at 60a–64a.) and that “PUC, by authorizing the provision of intrastate petroleum and refined petroleum products pipeline transportation service in Washington County in the August 21, 2014 Order expanded the service territory in which Sunoco is authorized to provide Mariner East service. (R.R. at 60a–64a.).”

If proposed pipeline operators have eminent domain authority that can be exercised on a given project, landowners’ negotiating ability and leverage can be reduced, based on the potential of an eminent domain “taking”. The takeaway message for landowners faced with a pipeline proposal is to perform due diligence on the power or authority of the entity seeking or claiming right of way rights of way across the property.

If you have questions about this post or pipeline rights of way, contact Brendan A. O’Donnell at 412-288-2226 or odonnellba@hh-law.com.