United States District Court, Western District of New York
January 24, 2000
NATIONAL FUEL GAS SUPPLY CORPORATION, PLAINTIFF,
138 ACRES OF LAND IN THE VILLAGE OF SPRINGVILLE, COUNTY OF ERIE, STATE OF NEW YORK; MATHEW MAHL; ARDENT RESOURCES, INC.; U.S. ENERGY DEVELOPMENT CORPORATION; ROBERT DZARA; MARIA DZARA; AND UNKOWN OTHERS, DEFENDANTS.
The opinion of the court was delivered by: Curtin, District Judge.
DECISION and ORDER
On August 27, 1999, Plaintiff National Fuel Gas Supply Corporation
("National Fuel") commenced this action for condemnation pursuant to the
Natural Gas Act, 15 U.S.C. § 717 et seq., and pursuant to an Order
Amending Certificate of Public Convenience and Necessity, which was
issued by the Federal Energy Regulatory Commission ("FERC"). See Item 1,
Exh. A. By this action, National Fuel seeks an order granting it a
permanent easement for the underground storage of natural gas ("the
storage easement") under 138 acres of land located in Springville, New
York. Id. ¶ 1. In addition to naming the land itself, National Fuel
has named the following persons and entities as defendants: Robert and
Maria Dzara ("the Dzaras"); Matthew Mahl ("Mahl"); Ardent Resources,
Inc.; U.S. Energy Development Corporation ("U.S. Energy"); and various
"unknown others." Id. ¶¶ 6-10. To date, only the Dzaras and Mahl have
filed an answer to National Fuel's complaint. Items 14, 15.
By its complaint, National Fuel asks the court to order that title to
the storage easement be vested in National Fuel. By letters submitted to
the court, National Fuel has argued that the court can and
should grant its requested relief immediately, and that the court may do
so without the benefit of a motion or further proceedings. The court has
held two informal meetings between counsel for National Fuel and the
Dzaras and Mahl; and on November 16, 1999, the court heard oral
argument. Subsequent to the oral argument, the court has received other
written submissions from the parties. Items 29 and 30. The court has
reviewed the papers and considered the parties' oral arguments. For the
reasons stated herein, the court now denies National Fuel its requested
I. Proceedings Before FERC
A. Prior to FERC Hearing
On July 1, 1998, National Fuel filed an application with FERC in which
National Fuel requested an amendment of its certificate of public
convenience and necessity. See Item 1, Exh. A, p. 1. By that
application, National Fuel asked FERC to authorize a "revised storage
field" for its Zoar Storage Field in Erie and Cattaraugus Counties. See
id. Notice of National Fuel's application was published in the Federal
Register on July 9, 1998. See 63 Fed. Reg. 38160 (1998). National Fuel,
Peoples Natural Gas Company, Columbia Gas Transportation Company, and the
New York State Department of Environmental Conservation ("the DEC")*fn1
all timely filed motions to intervene in the FERC proceeding. Id. at 2.
FERC granted all of these motions to intervene.
In April and May 1999, the Dzaras opposed National Fuel's application
by submitting various affidavits, documents, and pleadings with FERC.
Id. at 3. In their submissions, the Dzaras argued that: (1) U.S. Energy's
extraction of native gas from underneath the Dzaras' property had partly
caused the expansion of the Zoar storage field, and (2) that National
Fuel's storage field was an "outwardly drifting `run-away'" field that
posed a potential threat to the community. Id. However, FERC did not allow
the Dzaras to join the proceedings as parties because the Dzaras had not
requested permission for late intervention, nor had they explained why
they filed their opposition so delinquently. Id. at 3 n. 3.
B. FERC Hearing and Order
On July 28, 1999, FERC held a hearing and received "all evidence,
including [National Fuel's] application, and supplements, and exhibits
thereto. . . ." Id. at 5. On the basis of the evidence submitted, FERC
set forth a helpful factual background for this action:
National Fuel's Zoar Field was first used for the
storage of natural gas in 1916, and its present
certificated boundaries were established in 1948. . . .
The current certificated storage area of the Zoar
Field occupies 1,942 acres plus a 3,000 foot buffer
zone, for a total of 5,834 acres.
National Fuel has now determined, based on pressure
and production history, gas analysis, and analysis of
geological data obtained from recent drilling in the
Zoar Field, that the gas stored in the storage
reservoir actually occupies a larger area to the
northwest and southeast than was estimated decades ago
when the present boundary was defined. National Fuel
avers that the Zoar Field has not expanded; rather, it
has determined that the Zoar Field has all along been
occupying a larger area than believed when the storage
area was certificated. . . . In accordance with its
studies, it requests that the Commission expand
the authorized boundaries of the Zoar Field to reflect
the actual size of the storage reservoir.
Under National Fuel's proposed redefinition of the
storage field's boundaries the Zoar Field would be
expanded to encompass 6,841 acres plus a 5,236 acre
buffer zone, for a total of 12,077 acres.
Item 1, Exh. A, pp. 1-2.
In its resulting order, FERC noted that "it is standard reservoir
engineering practice to redefine the actual limits of the storage
reservoir . . . using data obtained during the later development and
operation of the storage field." Id. at 4. FERC concluded that after a
detailed evaluation of the geological and engineering
data submitted by National Fuel . . . we find . . .
that . . . [National Fuel's] proposed expansion of the
certificated Zoar Field reservoir storage boundary
area is necessary to protect the storage reservoir
from gas loss and to prevent other producers from
drilling into the reservoir's gas bubble.
Id. at 4. Thus, on July 29, 1999, FERC ordered that "National Fuel's
certificate of public convenience and necessity . . . is amended to
revise the certificated boundary of National Fuel's Zoar Storage Field as
described . . . in the body of this order." Id. at 5. By this order, FERC
approved National Fuel's application to expand the Zoar Storage Field by
more than 6,200 acres.
II. National Fuel's Present Action
National Fuel now comes before this court with its FERC order in hand
and states that the newly authorized Zoar Storage Field encompasses the
Dzaras' property, which consists of 138 acres situated at 13590 Trevett
Road in Springville, New York ("the Property"). See Item 1, Exh. B.*fn2
National Fuel seeks "a permanent gas storage easement in the Onondaga
rock formation, located approximately 1700 feet below the surface" of the
Zoar Storage Field. Id. ¶ 5. National Fuel's proposed easement
indicates that National Fuel would also need to install a certain number
of monitoring wells on the surface of the condemned property. See Item
28, Exh. B (proposed easement). National Fuel claims that it needs the
storage easement in order to operate the Zoar Storage Field, and that
"[o]peration of this natural storage field is critical to the ability of
National Fuel to supply its customers . . . with natural gas during the
fall and winter." Item 28, ¶ 6.
National Fuel and the Dzaras have not been able to reach an agreement
regarding what National Fuel should pay for the storage easement beneath
the Dzaras' land. However, National Fuel asserts in its complaint that it
has "made several good faith offers to Robert and Maria Dzara, the owners
of the property . . ., to purchase the permanent natural gas storage
easement at issue." Item 1, ¶ 12; see also Item 28, ¶ 5 (Miga
Affidavit) (stating that National Fuel made a "fair proposal" to the
Dzaras). As evidence of these good faith offers, National Fuel provided
the court with the correspondence between the parties regarding a
settlement value for the storage easement, as well as an affidavit from a
Senior Land Manager. See Item 1, Exh. D; Item 21; Item 28.
For their part, the Dzaras deny that National Fuel has made a good
faith offer of settlement. The history of correspondence between National
Fuel and the Dzaras reveal that the parties engaged in
occasional negotiations over the course of nearly two years. See Item
21. Finally, after one year had passed since the last correspondence,
National Fuel offered the Dzaras ten dollars ($10.00) "per acre per year
for a permanent storage easement for natural gas in the Premises. The
easement would also entitle us to reasonable surface access to the Dzara
No. 1 well and any other natural gas wells on the Premises." See id.
(letter dated Aug. 20, 1999). By letter dated August 27, 1999, counsel
for the Dzaras rejected this offer. See id.
I. The Parties' Positions
A. National Fuel Requests Immediate Relief
Presently, there is no motion before the court.*fn3 Notwithstanding
the absence of a motion, National Fuel insists that it is entitled to,
and that the court is empowered to grant, an order immediately vesting
title to the storage easement in National Fuel. See Item 28, Exh. B
(proposed easement). Once title to the storage easement has vested,
National Fuel states that it will gladly proceed to a trial or hearing on
the subject of just compensation.
National Fuel rightly argues that the holder of a FERC certificate of
public convenience and necessity may take land by an eminent domain
proceeding in federal court if the utility company is unable to secure the
necessary land interest through negotiations with the landowner. See
15 U.S.C. § 717f(h) (1994). National Fuel also argues that New York
State Eminent Domain Procedure Law ("NY EDPL") governs how National Fuel
must proceed in condemning the Property. National Fuel cites section
717f(h) of the Natural Gas Act:
[The] holder of a certificate of public convenience
and necessity . . . may acquire [a necessary land
interest] 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 State courts. The practice and procedure in any
action or proceeding for that purpose in the district
court of the United States 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.
15 U.S.C. § 717f(h) (1994). In light of this statutory language,
National Fuel argues: (1) that section 402(B) of the N.Y. EDPL governs
this action; (2) that National Fuel has fully complied with that
section;*fn4 and (3) that National Fuel, as a result of its compliance
with section 402(B), is entitled to an immediate taking of the Property.
In seeking an immediate taking, National Fuel relies most heavily on
the provisions of N.Y. EDPL § 402(B)(5). Specifically, section
[U]pon due proof of service of notice and upon filing
of such petition and proof to its satisfaction that
the procedural requirements of this law have been
met, the court shall direct the immediate filing and
entry of the order granting petition, which order the
condemnor shall file and enter together with the
acquisition map and the bond or undertaking if
required, in the office of the county clerk. . . .
Upon filing of the order and the acquisition map, . . .
title to such property shall then be vested in the
N.Y. Em.Dom.Proc. § 402(B)(5) (McKinney 1979 and Supp. 1999). In
light of its apparent compliance with section 402(B) and the provisions
of section 402(B)(5), National Fuel asserts that title to the storage
easement should vest in National Fuel immediately. See Item 17.
B. The Dzaras Argue Condemnation Would Be Improper
The Dzaras vigorously oppose National Fuel's representation of the
facts and the law. According to the Dzaras, National Fuel cannot secure
an underground storage easement pursuant to the Natural Gas Act because
the Act limits itself to holders of certificates of public necessity and
convenience who seek a:
[R]ight-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, for the
location of compressor stations, pressure apparatus or
other stations or equipment necessary to the proper
operation of such pipe line or pipe lines. . . .
15 U.S.C. § 717f(h) (1994).
Notwithstanding their position that the Natural Gas Act is inapplicable
to this case, the Dzaras go on to argue that it is federal, not state,
procedural law that governs this eminent domain proceeding. The Dzaras
claim that Rule 71A of the Federal Rules of Civil Procedure, in
conjunction with Supreme Court jurisprudence, has impliedly repealed the
practice and procedure clause of section 717f(h).
The Dzaras further argue that the Natural Gas Act gives condemnors no
substantive right to immediate possession, and that the Federal Rules of
Civil Procedure provide condemnors no procedural right to immediate
possession. As such, the Dzaras insist that National Fuel must proceed
more formally in order to condemn the Property.
Moreover, the Dzaras note that the Natural Gas Act requires condemnors
to negotiate with landowners in good faith before proceeding to court to
take land by eminent domain. The Dzaras argue that a trial will be
necessary on this issue, among others, because there are disputed
material facts regarding whether National Fuel engaged in good faith
negotiations with the Dzaras.
II. Scope of Natural Gas Act and Underground Storage Easements
As noted supra, the Dzaras argue that the Natural Gas Act does not give
National Fuel the authority to seek an easement for the underground
storage of natural gas. The Dzaras argue that the Act applies only to the
construction or maintenance of pipelines for natural gas. See
15 U.S.C. § 717f(h) (1994). However, the Natural Gas Act generally
and section 717f(h) specifically are "sufficiently broad to encompass
. . . underground gas storage facilit[ies] . . . [provided that] a
certificate of convenience and necessity has been . . . issued by
[FERC]." Columbia Gas Transmission v. Exclusive Gas Storage Easement,
776 F.2d 125, 128 (6th Cir. 1985); see also Transcontinental Gas Pipe
Line Corp. v. 118 Acres of Land, 745 F. Supp. 366 (E.D.La. 1990) (holding
that section 717f(h) "encompass[es] the right to expropriate subsurface
gas storage rights").
Furthermore, the Supreme Court has recognized the breadth of the
Natural Gas Act and the way in which it encompasses
the need for underground storage. In Schneidewind v. ANR Pipeline Co.,
485 U.S. 293, 295 n. 1, 108 S.Ct. 1145, 99 L.Ed.2d 316 (1988), the Court
recognized that "transportation" of natural gas "includes storage."
Petitioners argued below that [plaintiff ANR]
Storage [Company] was not a natural gas company within
the meaning of the [Natural Gas Act], contending that
the storage of gas constitutes neither the
transportation nor the sale of gas in interstate
commerce. Both courts below rejected this argument,
reasoning that "transportation" includes storage.
"`Underground gas storage facilities are a necessary
and integral part of the operation of piping gas from
the area of production to the area of consumption.'"
Id. (quoting opinions of district court and court of appeals from same
case) (emphasis added).
By arguing that National Fuel cannot secure an easement for underground
storage of natural gas pursuant to the Natural Gas Act, the Dzaras read
the Act too narrowly and ignore relevant case law addressing this issue.
The court holds that National Fuel may seek the storage easement under
the Natural Gas Act.
III. Federal or State Procedural Law
The Dzaras have argued that federal, rather than state, procedural law
governs this eminent domain proceeding. Such an argument is novel given
the Natural Gas Act's express provisions to the contrary:
The practice and procedure in any [eminent domain]
action or proceeding [brought under the Natural Gas
Act] in the district court of the United States 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.
15 U.S.C. § 717f(h) (1994). While the Act's language seems
unambiguous on this point, the issue here is whether Rule 71A of the
Federal Rules of Civil Procedure supersedes this "practice and procedure
clause" from the Natural Gas Act. In relevant part, Rule 71A provides:
The Rules of Civil Procedure for the United States
District Courts govern the procedure for the
condemnation of real and personal property under the
power of eminent domain, except as otherwise provided
in this rule.
As a preliminary matter, the court notes the opinions of two courts
that decided that state, not federal, law applies to the "practice and
procedure" of an eminent domain action brought under section 717f(h) of
the Natural Gas Act. First, in Mississippi River Transmission Corp. v.
Tabor, 757 F.2d 662 (5th Cir. 1985), the court heard an appeal
concerning, among other issues, whether the defendant landowner "owned a
compensable property right that required expropriation, [and] whether the
amount of compensation awarded . . . was just. . . ." Id. at 665. The
Tabor court noted that "Louisiana law controls the issues in this case."
Id. at 665 n. 3. Likewise, in Tennessee Gas Pipeline Co. v. 104 Acres of
Land, 780 F. Supp. 82, 84 (D.R.I. 1991), the court addressed the issue of
just compensation for a "condemnation of a pipeline easement across an
80.8 acre" stretch belonging to the defendant landowner. In the context
of fixing damages under section 717f(h), the Tennessee Gas court held
that "Rhode Island law . . . controls the issues in this case."
780 F. Supp. at 85.
At first blush, these holdings from Tabor and Tennessee Gas seem
completely in line with the present action. However these two cases
involved questions of substantive law rather than questions of procedural
law. In this action, the issue is whether federal procedural law should
govern. Tabor and Tennessee Gas, then, are distinguishable from the
present action. As such, the court discounts the value of these two cases
with respect to the court's present analysis.
Several courts have, however, spoken to the precise issue that the
court faces here. In two cases, courts applied the procedural law of the
state where the property was situated. First, in Algonquin Gas
Transmission Co. v. 60 Acres of Land, 855 F. Supp. 449 (D.Mass. 1994),
the court confronted an evidentiary question in the context of an eminent
domain proceeding brought under section 717f(h).*fn5 The court there
simply looked to the language of section 717f(h) and held that it was
bound to "apply the `practice and procedure' followed in similar
proceedings in the courts of the state where the property is situated."
Algonquin Gas, 855 F. Supp. at 453. Without any further analysis, the
Algonquin Gas court concluded that "the court must apply the practice and
procedure that are followed in eminent domain cases in Massachusetts state
The court in Portland Natural Gas Transmission System v. 4.83 Acres of
Land, 26 F. Supp.2d 332 (D.N.H. 1998), came to the same conclusion as the
court in Algonquin Gas. Portland Gas involved a natural gas company that
petitioned for a permanent easement so that it could build and maintain a
pipeline for natural gas. The court in Portland Gas noted the express
provisions of section 717f(h) and dispensed with an argument raised by a
defendant landowner in the following way:
Since State law, N.H.Rev.Stat.Ann. ("RSA") 371:15, V,
provides a holder of a FERC certificate with a right
to such a "quick take," it is irrelevant whether or
not such a right is available under federal law. . . .
[Under section 717f(h) of the Natural Gas Act,] RSA
371:15, V, is . . . properly construed in this context
to provide the same substantive right to a quick
take, whether the forum is a State or federal court.
Id. at 335-36. Thus, the court in Portland Gas clearly decided that
state, not federal, procedural law governed eminent domain proceedings
brought under the Natural Gas Act.
Admittedly, all of the above cases — Tabor, Tennessee Gas,
Algonquin Gas, and Portland Gas — favor National Fuel's interests
to varying degrees. However, it is critically important that none of
those cases addressed the issue of how Rule 71A interacts with
15 U.S.C. § 717f(h). This court has determined that it is necessary
to resolve that question before determining whether federal or state
procedure will govern this eminent domain proceeding. As a result, these
four cases favoring National Fuel are of very limited value to the
On the other hand, the Eleventh Circuit and a court from the Eastern
District of Tennessee have both resolved how Rule 71A interacts with
section 717f(h). Both courts determined that Rule 71A superseded section
717f(h), and that federal, not state, procedural law governs eminent
domain proceedings brought under the Natural Gas Act.
In Southern Natural Gas Co. v. Land, Cullman County, 197 F.3d 1368
(11th Cir. 1999), the Eleventh Circuit recently held that federal
procedure governs condemnation actions brought under Natural Gas Act. In
Southern, the court of appeals faced a case where the plaintiff natural
gas company was attempting "to condemn nearly 200 tracts of land." Id. at
1371. In the appeal, the parties argued over whether certain landowners
were entitled to a jury trial. In setting forth its analysis, the court
framed the issue this way: "This appeal raises the issue of whether Rule
71A of the Federal Rules of Civil Procedure supersedes the Natural Gas
Act's practice and procedure clause for the condemnation of property."
Id. at 1372. The court agreed with Southern and found that
Rule 71A did indeed supersede the Natural Gas Act's practice and
procedure clause. Id.
In coming to this conclusion, the court in Sourthern first reasoned
that "statutes relating to the same subject matter should be construed
harmoniously if possible, and if not, that more recent or specific
statutes should prevail over older or more general ones." Id. (quotation
and citation omitted). Further, the court relied on a pair of Supreme
Court decisions*fn6 in which the Court found that "Rule 71A supersede[d]
the practice and procedure language of the prior statute[s]." Id.
In a case relied on by the Eleventh Circuit in Southern, the Eastern
District of Tennessee also concluded that Rule 71A superseded the
practice and procedure clause in section 717f(h). See USG Pipeline Co. v.
1.74 Acres, 1 F. Supp.2d 816 (E.D.Tenn. 1998).*fn7 USG Pipeline involved
plaintiff USG Pipeline's "Motion for Possession" of a number of real
properties. Id. at 817-18. The defendant landowners argued that the court
should deny USG's motion because USG had failed to "comply with Tennessee
law concerning condemnation." Id. at 827. The court in USG Pipeline,
however, found that Rule 71A of the Fed.R.Civ.P. had "supersede[d]" the
language in section 717f(h) "requiring compliance with state practice and
procedure." 1 F. Supp.2d at 827. In reaching this decision, the court in
USG Pipeline relied on: (1) Rule 71A itself; (2) that rule's legislative
history; and (3) a pair of Supreme Court decisions.
As the court in USG Pipeline did, this court looks to the Advisory
Committee's Notes to Rule 71A, where the Committee stated. "Rule 71A
affords a uniform procedure for all cases of condemnation invoking the
national power of eminent domain, and . . . supplants all statutes
prescribing a different procedure." Fed.R.Civ.P. 71A (Advisory Notes).
Subsequent to the adoption of Rule 71A in 1951, one court stated that
"[t]o reread the anarchist effects of conformity with state practice back
into Rule 71A . . . would undermine one of the basic objectives of that
rule." West, Inc. v. United States, 374 F.2d 218, 224 (5th Cir. 1967).
It is also highly relevant that Congress enacted the Natural Gas Act in
1938, see 15 U.S.C. § 717f(h) (1994),*fn8 while it was not until
1951 that Congress adopted Rule 71A. See Fed.R.Civ.P. 71A. Much like the
court of appeals in Southern, this court finds that "it is elementary
that a more recent and specific statute is reconciled with a more
general, older one by treating the more specific as an exception which
controls in the circumstances to which it applies." Thompson v.
Calderon, 1998 WL 420300 (9th Cir.) (citing 2B Sutherland on Statutory
Construction § 51.02 (5th ed. 1992)).
The court recognizes that there is an opposing maxim: "[R]epeals by
implication are not favored." Morton v. Mancari, 417 U.S. 535, 549, 94
S.Ct. 2474, 41 L.Ed.2d 290 (1974). However, a court should read the more
recent statute as repealing the older statute if giving effect to both of
the statutes would defeat the "sense and purpose" of the more recent
statute. Watt v. Alaska, 451 U.S. 259, 266,
101 S.Ct. 1673, 68 L.Ed.2d 80 (1981); see also Mancari, 417 U.S. at 551,
94 S.Ct. 2474. In this case, it would defeat the express purpose of
Rule 71A if the court were to apply section 717f(h)'s provisions regarding
state practice and procedure. See West, 374 F.2d at 224 (remarking on
impermissible "anarchist effects" that "conformity with state practice"
would have on the policy of Rule 71A).
A pair of Supreme Court decisions regarding other statutory authority
for federal eminent domain proceedings also inform this court's
analysis. In United States v. 93.970 Acres, the Court was dealing with a
condemnation action brought by the federal government. 360 U.S. 328, 79
S.Ct. 1193, 3 L.Ed.2d 1275 (1959). In a footnote, the Court stated:
Respondents rely on . . . 50 U.S.C.A. § 171,
which provided that condemnation proceedings like the
one here involved were "to be prosecuted in accordance
with the laws relating to suits for the condemnation
of property of the States wherein the proceedings may
be instituted." But it is settled that this language
required conformity in procedural matters only. . . .
And insofar as it required such procedural conformity
it was clearly repealed by Rule 71A, Federal Rules of
Civil Procedure. . . .
Id. at 333 n. 7, 79 S.Ct. 1193.
More recently, the Court ruled on a similar issue in Kirby Forest
Industries, Inc. v. United States, 467 U.S. 1, 104 S.Ct. 2187, 81 L.Ed.2d
1 (1984). In Kirby, the court faced a condemnation proceeding brought by
the federal government pursuant to the "`straight condemnation' procedure
prescribed in 40 U.S.C. § 257." Id. at 3,104 S.Ct. 2187. The Court
[S]uits under § 257 originally were required to
"conform, as near as may be, to the practice,
pleadings, forms and proceedings existing at the time
in like causes in the courts of record of the State"
in which the suits were instituted. . . . The
adoption in 1951 of Rule 71A capped an effort to
establish a uniform set of procedures governing all
federal condemnation actions.
Id. at 4 & n. 2, 104 S.Ct. 2187.
National Fuel argues that Kirby and United States v. 93.970 Acres are
inapposite because they involved statutes other than the Natural Gas
Act. While this is true, National Fuel's argument ignores the fact that
natural gas companies, like National Fuel, exercise the power of eminent
domain only because Congress has delegated this federal authority to
them.*fn9 Logically, the procedure which governs the federal
government's condemnation proceedings should also govern the condemnation
proceedings brought by private entities by virtue of the same federal
power of eminent domain. Thus, for the purposes of this analysis, it is
unimportant that Kirby and United States v. 93.970 Acres involved the
United States government as condemnor as well as different statutory
authorities. Rather, these cases underscore Congress's intent that Rule 71A
provide uniform procedure for all condemnation actions brought under
federal authority. See Fed.R.Civ.P. 71A (Advisory Notes) (discussing
policy of uniform procedure for "the national power of eminent domain").
Finally, in an informative dissenting opinion, Judge Traxler of the
Fourth Circuit lends credence to this court's understanding of Rule 71A's
role in federal condemnation actions.
Before Rule 71A became effective on August 1, 1951,
land condemnation proceedings in federal court were
subject to the vagaries of a patchwork of inconsistent
state and federal procedures. . . . Some federal
statutes, for example, authorized the exercise of the
power of eminent domain and directed that courts
employ the procedure used by the state courts in
while other statutes merely authorized condemnation
without addressing the appropriate procedure to
follow. Still other statutes provided comprehensive
procedures for certain types of condemnation actions.
The adoption of Rule 71A greatly simplified matters,
"capp[ing] an effort to establish a uniform set of
procedures governing all federal condemnation
actions." Kirby Forest Indus., Inc. v. United States,
467 U.S. 1, 4 n. 2, 104 S.Ct. 2187, 81 L.Ed.2d 1
(1984). The text of the rule now makes clear that
"[t]he Rules of Civil Procedure for the United States
District Courts govern the procedure for the
condemnation of real and personal property under the
power of eminent domain, except as otherwise provided"
in Rule 71A itself.
United States v. Keller, 142 F.3d 718
, 725 (4th Cir. 1998) (Traxler, J.
In light of the foregoing, the court finds that Rule 71A supersedes the
practice and procedure clause of section 717f(h) and that it is federal,
not state, procedural law that governs the present condemnation
proceeding. As such, New York's EDPL does not procedurally govern.
Rather, Rule 71 A governs procedurally, while the Natural Gas Act governs
IV. Immediate Possession and the Natural Gas Act
Having decided that federal procedural law governs, the court must now
determine whether National Fuel is entitled to immediate vesting of title
to the storage easement. Rule 71A, unlike section 402(B) of the EDPL,
does not give condemnors the right to immediate possession once the
condemnor has fulfilled all of the Rule's procedural requirements.
Therefore, if National Fuel may claim the right to immediate possession
of the Property, it must do so pursuant to a substantive or equitable
However, the Natural Gas Act does not give private natural gas
companies, such as National Fuel, the substantive right to immediate
possession of property. Northern Border Pipeline Co. v. 127.79 Acres of
Land, 520 F. Supp. 170 (D.N.D. 1981), represents the lead case on this
issue. In that case, plaintiff Northern Border, a natural gas company,
moved for immediate possession of its requested easement. Id. at 171. In
relevant part, the court held:
Although the plaintiff possesses the authority
pursuant to Title 15 U.S.C. § 717f(h) to exercise
the right of eminent domain, this right is not in
itself sufficient to authorize the taking of immediate
possession prior to the condemnation proceeding
itself. The authority to take immediate possession
conferred by the Declaration of Taking Act
[40 U.S.C. § 258a-258e] and similar statutes which
confer the authority to take immediate possession is
reserved to the United States. No statutory authority
exists which would authorize a private party, such as
the plaintiff, to take immediate possession of the
real property prior to the condemnation proceeding.
Id. at 172.
Other courts have cited favorably to Northern Border and have
recognized the distinction between cases where the United States is the
condemnor and cases where a private entity is the condemnor
acting under federal authority. See Humphries v. Williams Natural Gas
Co., 48 F. Supp.2d 1276, 1281 (D.Kan. 1999) (holding that Natural Gas Act
did not give plaintiff right to immediate taking and reasoning that "the
gas company bringing the condemnation action is a private corporation,
and . . . unlike the federal government, its only authority to condemn
property is grounded in § 717f(h)"); USG Pipeline, 1 F. Supp.2d at 825
("nothing in the Natural Gas Act automatically authorizes the possessor
of a FERC certificate to take immediate possession of the property sought
to be condemned prior to the condemnation proceeding"). In light of the
foregoing, this court holds that National Fuel has no substantive right
to immediate possession pursuant to the Natural Gas Act.
Although National Fuel has no substantive or procedural rights to
immediate possession, certain courts have recognized that a district
court, by its inherent equitable power, may grant a utility company
immediate possession of subject property. See e.g., Northern Border
Pipeline v. 86.72 Acres, 144 F.3d 469, 471 (7th Cir. 1998). However,
courts must exercise inherent powers with great restraint because such
powers are shielded from direct democratic controls. See Roadway Express,
Inc. v. Piper, 447 U.S. 752, 764, 100 S.Ct. 2455, 65 L.Ed.2d 488 (1980).
The court finds that National Fuel has not stated an equitable right to
its requested relief. First, the existence of an adequate legal remedy
generally precludes the availability of equitable relief. See e.g.,
O'Shea v. Littleton, 414 U.S. 488, 499-504, 94 S.Ct. 669, 38 L.Ed.2d 674
(1974). Here, it appears that National Fuel has an adequate legal
remedy, i.e., the condemnation proceeding. In addition, a plaintiff must
be able to show the threat of an irreparable injury in order to state a
claim for equitable relief. See id. In this case, there are only
conflicting indications that National Fuel or its customers might be
subject to irreparable injury, such as great expenses or losses of
service, if immediate relief is not granted. In his affidavit, National
Fuel representative Richard Miga has stated that the storage easement is
"critical" to National Fuel's ability to supply its customers with
natural gas. Item 28, ¶ 6. Yet, counsel for National Fuel conceded to
the court at oral argument that neither National Fuel nor its customers
would face irreparable injury if National Fuel failed to secure title to
the storage easement within a matter of weeks. Thus, in balancing the
very limited evidence regarding these equitable considerations, the court
finds that use of the court's inherent equitable power is unwarranted.
In light of the foregoing, the court finds that National Fuel has no
procedural, substantive, or equitable right to the immediate vesting of
title to the storage easement.
V. Good Faith Negotiations
While not necessary to the court's present analysis, the court notes
that the Dzaras have argued that National Fuel will ultimately fail to
secure the storage easement because of its failure to comply with a
statutory requirement of the Natural Gas Act. That is, in order for a
plaintiff natural gas company to establish its entitlement to take
property by eminent domain under the Natural Gas Act, the plaintiff must
show: (1) that it holds a FERC certificate authorizing the relevant
project; (2) that the land to be taken is necessary to the project; and
(3) that the company and the landowners have failed to agree on a price
for the taking. See Tennessee Gas Pipeline Co. v. Massachusetts Bay
Transp. Auth., 2 F. Supp.2d 106, 108 (D.Mass. 1998). In addition to
showing an inability to agree on a price with the landowner, the plaintiff
utility company must also establish that it engaged in good faith
negotiations with the landowner. See Transcontinental Gas, 745 F.
Supp. at 369. In the present case, the Dzaras allege that National Fuel
is not entitled to take title to the storage easement because it
failed to engage in good faith negotiations with them. See Item 24, p.
4. The Dzaras assert that National Fuel tortiously interfered with the
Dzaras' lease with U.S. Energy by taking a leasehold interest in the
Property long before National Fuel and the Dzaras began to negotiate
regarding the storage easement. See id., Exh. C, ¶¶ 7-22. According to
the Dzaras, their lease with U.S. Energy contemplated the use of an
active natural gas well. Apparently, the Dzaras were to receive royalties
from the sale of natural gas that was extracted from the well. See id.
The Dzaras claim that their lease with U.S. Energy contained a clause
that barred assignment of the lease without their approval. The Dzaras
further claim that National Fuel unlawfully took an assignment of the
lease and then caused production from the well to stop approximately two
years ago. See id. ¶¶ 11-15. As a result, the Dzaras allege that they
stopped receiving the royalties; payments for which they had bargained
when they signed the lease with U.S. Energy. Thus, the Dzaras allege,
National Fuel tortiously interfered with the lease, proceeded in bad
faith when negotiating, and thereby left the Dzaras without leverage in
The court need not reach a holding on this issue here. At some point,
however, National Fuel must refute the Dzaras' allegations by showing
that it negotiated with the Dzaras in good faith.
National Fuel made no motion for its requested relief. Therefore, there
is no motion for the court to deny. In light of the foregoing, however,
the court now holds that National Fuel is not entitled to an immediate
vesting of title to the storage easement.