In September, the Pennsylvania Supreme Court unanimously decided in Reading Area Water Authority v. Schuylkill River Greenway, that a “water authority” may not condemn a utility easement over privately-owned land for the sole purpose of providing a private developer sewage and drainage facilities for a proposed residential housing development. The case is important because it substantiates the 2006 Eminent Domain Code’s amendment barring takings for “private enterprise.” However, the Court’s decision avoided any seismic shifts in eminent domain takings law by side-stepping important constitutional law questions and preserving the power of regulated “public utilities” under PA law to condemn utility easements to provide water and sewer access in tandem with private development.

In Reading Area Water Authority, the Schuylkill River Greenway Association (“Greenway”), a non-profit corporation, owned a strip of land along the Schuylkill River. Greenway had planned to construct a public recreational trail on its property. But, adjacent to the Greenway property was a tract of land owned by a private developer, who sought to construct a single, 219-unit residential development on the tract of land. The private developer needed a utility easement that ran across the Greenway property to access the Schuylkill River for purposes of water and sewage facilities that would supply water and sewage to the planned residential development. The development, in other words, could not be completed without the utility easement. The developer persuaded the Reading Area Water Authority (“RAWA”) to support the development project.

After negotiations to purchase an easement across the property with Greenway failed, RAWA filed a Declaration of Taking to take the land to construct, maintain and operate utility and water lines to be placed under the Schuylkill River. Greenway challenged the taking, alleging the condemnation was invalid under the Property Rights Protection Act (“PRPA”), because the purpose of the taking was to use the property for private enterprise, which is prohibited under the Pennsylvania Eminent Domain Code.

The Pennsylvania Supreme Court unanimously agreed.

There are two important points to clarify when analyzing the Court’s decision.

First, the case is limited in its broader impact on future takings. The Court narrowed its review to the statutory validity of the water authority’s attempt to condemn the utility easement under the Pennsylvania Eminent Domain Code. The Code was amended by the state legislature in 2006 with the introduction of the PRPA, which prohibited takings for private enterprise. The amendment was a direct response to the 2005 US Supreme Court ruling in Kelo v. City of New London, which found that takings for purposes of economic development satisfied the Public Use Doctrine under the Constitution.

However, the Pennsylvania Supreme Court did not review the taking in Reading Area Water Authority under the US Constitution, but rather reviewed the taking under the statutory exceptions carved out by the PRPA and its limitation on the water authority’s power to condemn a utility easement. The Court stated, “We need not decide the constitutional issue because, even if we assume the condemnation can pass Fifth Amendment scrutiny, to be valid is must also be statutorily permissible.”

The Court essentially side-stepped the much broader and perhaps more significant question of whether condemning a utility easement for purposes of providing a private developer sewage and drainage facilities for a proposed residential housing development violated the Public Use Doctrine under the Fifth Amendment Takings Clause by bestowing a private benefit on the private developer instead of resulting in a broader public use. This means that, conceivably, a court still could uphold a similar taking that was at issue in Reading Area Water Authority by relying on the Public Use Doctrine of the Fifth Amendment in its determination rather than through statutory construction.

Second, the case does not completely bar the condemnation of utility easements for purposes of private enterprise. Instead, the Court’s decision restricts a “municipal water authority” from condemning for such purposes. However, a regulated “public utility” is exempt from the statutory restriction under Section 204(a)(2)(i) of the PA Eminent Domain Code and may condemn utility easements for the purpose of providing water and sewer access in tandem with private development. In other words, a water and sewer company designated as a regulated public utility under the Public Utility Code (66 Pa.C.S. § 102), and not a municipal water authority, may still condemn utility easements for purposes that may still bestow a private benefit to a private developer.

These are important distinctions to be pulled from the opinion. Landowners and condemning authorities should be aware that the ruling is not a broad sweeping bar on condemnations for private enterprise per se, but rather a strictly confined ruling on distinguishing between water authorities and public utilities power to condemn for purposes of private enterprise through a statutory construction interpretation.