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Transcontinental Gas Pipe Line Corp. v. Hackensack Meadowlands Development Commission

decided: August 2, 1972.


Adams, Max Rosenn and Hunter, Circuit Judges.

Author: Hunter


JAMES HUNTER, III, Circuit Judge.

In this appeal, we are faced with the question of the extent to which a state may legitimately interfere with interstate commerce through the exercise of its police powers. In apparent conflict are the State of New Jersey's plans for the controlled development of its "Meadowlands District" and the right of a federally certificated natural gas company to expand its storage facilities on land acquired by it approximately five years before the enactment of the Hackensack Meadowlands Reclamation & Development Act, N.J.S.A. 13:17-1 et seq.


Transcontinental Gas Pipeline Corporation ("Transco"), the appellee, is a natural gas company within the meaning of the Natural Gas Act ("Act"), 15 U.S.C. ยง 717 et seq.,*fn1 and is thereby vested with various rights and powers as well as concomitant duties and obligations. Pursuant to authorization by the Act and the resulting periodic issuance of Certificates of Public Convenience and Necessity*fn2 by the Federal Power Commission ("FPC"), Transco has constructed and presently maintains an extensive pipeline system which gathers natural gas from onshore and offshore Gulf Coast locations, transports the gas through interstate commerce, and subsequently sells it to various distributors along the East Coast. Approximately seventy-five percent of the total amount of natural gas used in the state of New Jersey is supplied by Transco.

In 1963 Transco purchased from the New Jersey Borough of Carlstadt a five hundred acre tract of barren and undeveloped meadowlands for the purpose of constructing facilities for the processing and storage of Liquified Natural Gas ("LNG"). Subsequently the company acquired from the state, in return for settlement of pending litigation, any interests the state might have under disputed title.*fn3 After the FPC issued the necessary certificates, Transco constructed an LNG plant including an underground storage container. Soon after completion, however, engineering studies determined that the container, as constructed, would be unable to accommodate the full quantity of LNG for which it had been designed. In July of 1968, the FPC issued an amended certificate, authorizing the construction of an above-ground cylindrical storage container. The plant -- including the aboveground container and appurtenant liquification and vaporization facilities -- is presently in full operation.

In January of 1968, pursuant to the enactment of the Hackensack Meadowlands Reclamation and Development Act,*fn4 the Hackensack Meadowlands Development Commission ("Commission"), an autonomous, regional agency was established with the power to "adopt a master plan . . . for the physical development of all lands lying within the [Hackensack Meadowlands] District. . . ."*fn5 As stated in the Act, the area encompasses approximately 21,000 acres of saltwater swamps, meadows and marshes commonly known as "meadowlands" located in the lower Hackensack River Basin.*fn6

The Transco property is located within one of the Commission's "Planning Areas," the company's existing facilities utilizing approximately sixteen acres of its five hundred acre tract.

In the fall of 1969, Transco was notified by its customers that additional LNG service would hence be required, especially during the peak winter season periods. To meet these demands, Transco applied to the FPC for authorization to construct a second above-ground storage facility. The construction would encompass an additional seven acres of the Transco property. As required by law, public notice of the application was published by the FPC and special notice given to the Governor and Public Service Commission of New Jersey. Neither the State, nor the Public Service Commission, nor the Commission petitioned to intervene or participate in any manner in the proceedings before the FPC although a number of Transco's customers were granted permission to intervene in support of the application. After a hearing the certificate was issued on March 12, 1970.

The Hackensack Meadowlands Reclamation and Development Act provides that a building permit must be obtained from the Commission prior to the commencement of any construction on land covered by the Commission's Master Plan.*fn7 After numerous meetings with Transco representatives, the Commission refused to issue the necessary permit, ostensibly on the grounds that the construction and operation of the proposed storage facility was not a "permitted use" under the Master Plan. The Commission concluded that to allow the proposed construction a variance would have to be issued. However, that, too, was denied, the Commission concluding that the construction would "seriously restrict the range of possible uses in the surrounding areas" and that it would "fail to meet applicable planning and safety regulations."*fn8 Nevertheless, after further negotiations, the Commission offered to "reconsider" its position upon the condition that Transco, inter alia, agree to abandon the entire plant by 1980.*fn9 Transco refused, contending that its obligations under the Natural Gas Act prohibited such an agreement.*fn10

On July 22, 1970, Transco filed suit in the District Court to enjoin the Commission from interfering with construction of the facility. The Commission counterclaimed to enjoin commencement of construction. After six days of hearings, the District Court permanently restrained the Commission from interfering with construction of the facility.*fn11 The Commission appeals and we affirm.*fn12


It is well established that the interstate transmission and sale of natural gas is within the regulatory ambit of the Commerce Clause of the Constitution. Commonwealth of Pennsylvania v. State of West Virginia, 262 U.S. 553, 43 S. Ct. 658, 67 L. Ed. 1117 (1923); Federal Power Commission v. National Gas Pipeline Co., 315 U.S. 575, 62 S. Ct. 736, 86 L. Ed. 1037 (1942). Although the states are not precluded from imposing reasonable restraints and restrictions on interstate commerce, and although the authority to enact zoning ordinances under the state's police power is clear, see, e.g., Village of Euclid, Ohio v. Ambler Realty Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926), it is equally settled that a state may not exercise that police power where the necessary effect would be to place a substantial burden on interstate commerce. Southern Pacific Co. v. Arizona, 325 U.S. 761, 65 S. Ct. 1515, 89 L. Ed. 1915 (1945).*fn13 We must therefore look to the particular facts presented by this case to ...

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