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Carbon pipeline, opposed by some landowners, may split South Dakota's Republican caucus over eminent domain

While the pipeline, proposed by Iowa-based Summit Carbon Solutions, has been sold as a key part of keeping South Dakota ethanol competitive, the potential use of eminent domain in its construction has property rights advocates expressing their discontent.

Ethanol tanker
Tank cars are filled up with ethanol in this file photo. Summit Carbon has argued their pipeline would make sure the state's ethanol industry continues into the future.
Matt Gade / Republic
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SIOUX FALLS, S.D. — A carbon pipeline project promising to increase the competitiveness of South Dakota ethanol has grabbed the attention of legislators and their constituents across the state, possibly pitting the agricultural industry against the property rights of affected landowners during next year’s legislative session.

In total, the project, proposed by Iowa-based agriculture company Summit Carbon Solutions, consists of 2,000 miles of pipeline and 32 ethanol plants in Nebraska, Iowa, Minnesota, South Dakota and North Dakota, with 469 of those miles and seven ethanol plants in eastern South Dakota.

The pipeline would capture the carbon dioxide released during the fermentation process that creates ethanol and transport those emissions to a site west of Bismarck, where the pressurized, liquified carbon would sit deep underground. Summit Carbon Solutions says the project would “create jobs, generate new property tax revenue for local communities, support local suppliers, and strengthen the regional economy.”

“The question isn't if you support our projects, are you supporting federal stimulus for carbon sequestration? Are you supporting the Green New Deal? That's not the question that we're here to discuss today,” Chris Hill, the director of environmental and permitting at Summit Carbon Solutions, told a crowd at a public hearing in Aberdeen on March 25. “The question that we're discussing is do you want those federal actions and that economic benefit going to the East Coast and the West Coast? Or do you want those dollars coming back to your communities, supporting your industries?”

Summit Carbon Solutions says its plan for an early 2023 start for construction remains unchanged, but the project has many roadblocks left to pass. Those include finalizing a proposed route, negotiating with hundreds of landowners and awaiting a ruling from the Public Utilities Commission, not to mention the possibility of a clash in circuit court over eminent domain.

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Without an alteration to federal law, significant delays in this process could mean an inability to take advantage of lucrative federal subsidies.

As long as construction on the pipeline begins before January 2026, Summit Carbon Solutions would be eligible for the 45Q carbon sequestration tax credit, which pays $50 for each metric ton of carbon stored in 2026 and increases with inflation after that. With contracts in place to sequester at least 9 million tons of carbon per year and a maximum capacity of 12 million, Summit Carbon Solutions could receive a windfall of between $450 million and $600 million in tax credits in 2026 alone.

“Billions and billions and billions in tax credits that they'll trade away to their rich friends,” said Brian Jorde, an attorney representing South Dakota landowners in a lawsuit against Summit Carbon Solutions. “All on the backs of hard working South Dakotans. This is probably the worst possible project that could even be fashioned and the fact that it’s even being considered is outrageous.”

But many South Dakotans remain undecided. Dave Ellens, a farmer who sells his corn crop to an ethanol plant that would be involved in the project, understands the concerns on both sides.

“I think there is a fine line to walk between respecting landowners, because ultimately they own the ground in which this pipeline has to cross, and the other side being mindful of the future of ethanol,” Ellens told Forum News Service in a phone interview on July 24. “For ethanol to have a place in the future we need to make sure its carbon intensity is as low as possible.”

Screen Shot 2022-07-28 at 12.31.46 PM.png
The proposed route through South Dakota. (Courtesy Summit Carbon Solutions)

Legislature has multiple options to weigh during session

The delays caused by moratoriums and the expected reveal by Summit Carbon Solutions of the final proposed route in October mean the state Legislature will have an opportunity to affect the process next session. Landowners say they are watching closely.

“So many of us have just lived our daily lives and gone about our business out here in the rural areas. A lot of times with the opinion of, well, there's not much we can do about it,” said Mark Lapca, a fifth-generation landowner in McPherson County. “Well, that's gone on for too long. So now we're starting to, well, we're not starting now. We are paying attention. And we're going to attempt to work with our legislators to try to get some of these laws fixed.”

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Jorde added that he and his clients would “figure out which elected officials stand with landowners and which ones don't.”

The Legislature would have numerous options in terms of making it more difficult for the pipeline to be built, especially in the case that Summit Carbon is unable to build the project entirely through voluntary easements and public right-of-ways. For example, the Legislature could overturn 21-35-31, the law that has been used to allow biological and cultural surveys , in some cases without landowner permission. Jorde is representing dozens of landowners in a lawsuit trying to overturn the law as unconstitutional.

In Iowa, a proposed amendment to a larger law would have postponed the required public hearings on the carbon pipeline until February 2023. Though it was not signed into law, it’s one example of how legislative oversight could delay the pipeline process.

State Sen. Al Novstrup, R-Aberdeen, told Forum News Service that many of his constituents in Brown County have expressed skepticism about the project. He said the issue of eminent domain was another area the Legislature could address.

Al Novstrup
Al Novstrup

“If eminent domain is going to come into play, which I imagine it will, then I think, state and local governments have to take a look at our laws of eminent domain and see if they're appropriate,” Novstrup said.

Multiple legislators told Forum News Service that their constituents were worried about eminent domain. James Wangsness, a former commissioner and representative from Hand County running as a Republican in the District 23 race, says his decision to re-enter politics was “partially due to the pipeline deal.”

But the issue could form a rift in the Republican party, with those concerned about property rights and precedent on one side and those concerned about agriculture on the other. Rep. Charlie Hoffman, R-Eureka, represents multiple counties in the proposed route. He wrote a column earlier this year expressing his support for the project.

Still, many legislators have paid attention to the process but have yet to take sides, especially since no bills have been written. Come session, staying neutral on the hot-button issue could prove difficult.

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"Anytime you are supporting or opposing development, there's a lot of interest and there's a lot of money at stake, which for the legislators turns into a lot of lobbyists running around," Rep. Will Mortenson, R-Pierre, said.

One person who may engage in lobbying during the coming session is Dan Lederman, the chair of the South Dakota Republican who has been an outspoken advocate of the project.

Notably, Gov. Kristi Noem has not made a public comment on the issue. Noem’s office has referred media inquiries on the matter to the PUC.

“I was listening to some cable news station and our governor was on there talking about how she's working for the people of South Dakota to make sure they keep their freedoms,” ReEtta Sieh, who owns and operates a farm in McPherson County, told Forum News Service on July 22. “I'm a little disappointed in her that she hasn't come out to help us keep our freedom to do with our land what we see as right.”

Summit Carbon paints pipeline as key for success of ethanol industry

Once completed, the pipeline would lower the carbon intensity — or CI — score of the ethanol and allow it to benefit from low carbon fuel premiums currently in place in California and Oregon, though other states, such as Minnesota , may soon follow suit.

“We think it can bring positive impacts to the ethanol industry, and subsequently the corn growers who sell their corn to those ethanol plants, since 50% of the corn in the country goes to ethanol production,” John Satterfield, the director of regulatory affairs at Summit Carbon, told Forum News Service in a phone conversation on July 25. “We think that we've got a good story to tell.”

Summit Carbon says the CI score of ethanol, which currently averages just over 51, would drop 25 points upon completion of the project.

However, the pipeline is not the only possible way for ethanol producers to lower their footprint. Emerging research could turn captured carbon into a key input in chemicals, beverages, plastics and more, meaning on-site capture by ethanol producers, rather than sequestration, could both lower emissions and increase profits.

Scott Mundt, the CEO of Wentworth-based Dakota Ethanol LLC, one of the seven ethanol plants in the state on the pipeline route, says he is “neutral” on the project.

“I’m very sensitive that I may have some of the people who deliver corn to us that are in favor of that project and some that are not in favor of the project,” Mundt said.

While he did say the project would be an important part of reaching net-zero production in the next decade, Mundt says without it his company would still have “a pathway to sell our ethanol to the markets that reward us for lower carbon,” through more sustainable farming practices and other carbon capture technologies.

POET, the nation’s largest producer of biofuel based in Sioux Falls, has not yet attached any of its five ethanol plants in the state to the Summit Carbon project. Even so, the company’s sustainability report lays out how the company plans to reach a zero or even negative CI, though the forecast is not attached to a specific date. POET declined a request for comment.

MORE SUMMIT CARBON COVERAGE
Public hearings in South Dakota on the pipeline have been set for November. Other states on the route are Iowa, Minnesota, Nebraska and Illinois, with a site in Illinois designated for storing the liquid carbon dioxide. South Dakota-based POET has 18 ethanol plants included in the project.

Landowners cite property rights, safety issues in opposition

Though SCS says they are working to maintain good relationships with the private landowners whose property the pipeline will have to cross, including providing some flexibility on the exact location of the construction, some residents have dug in their heels.

“Right away from the get go, we declined to be part of the project,” Lapca said. “That's when the threats of eminent domain started to poke out in the process. And any time you want to get a landowner riled up, you bring up eminent domain.”

The issue of eminent domain, which allows the taking of private property for “public use” in exchange for “just compensation,” would be decided by circuit court only in the event that a permit is approved by the PUC and SCS opts to go in that direction. The definition of “public use,” though clear in cases such as the interstate highway system, would be more up for debate regarding the privately-owned pipeline. SCS materials and statements do appear to make the case that the project would benefit the local economy and local landowners.

While Satterfield told Forum News Service that SCS has signed voluntary easements with 250 South Dakotans along the route and plans to complete the project entirely through easements, many are not convinced by this promise.

“If they don't want to use [eminent domain], then just say they will not use it, and they renounce any rights to use it. Then anyone who wants the project they can work with and those who don't, don't have to have their property rights taken away. It's very simple,” Jorde said. “They either renounce it completely or they're 100% on board to use it. There's no middle ground. ‘We don't want to’ means nothing.”

In McPherson, Brown and Spink Counties, landowner discontent and a lack of clear zoning rules around hazardous pipelines led to moratoriums being put in place to allow an update to those ordinances. The moratoriums from Brown and Spink County went into effect on July 19 and will last for one year, while McPherson County’s moratorium went into effect in January and will last “until a revised zoning ordinance can be approved and take effect.” Austin Hoffman, the state’s attorney in the county, said that process is still ongoing.

Outside of property rights, landowners have concerns about safety; although carbon dioxide gas is not flammable, it does displace oxygen and, in large quantities, can act as an asphyxiant, injuring and possibly killing people and their livestock in the event of a leak.

Residents referenced a 2020 leak in Satartia, Mississippi, that sent around 50 people to the hospital. Eyewitnesses described people passed out in their cars and emergency vehicles unable to drive into the scene due to a lack of oxygen.

However, Summit Carbon pointed out that the company running the pipeline had failed to follow safety guidelines and was fined by the Pipeline and Hazardous Materials Safety Administration, the federal agency tasked with overseeing carbon pipelines. The pipeline had also been carrying hydrogen sulfide, which is toxic and will not be carried in the pipeline.

“One of the things that we have decided to do in response to that incident is to not run any pipe perpendicular to steep slopes, to prevent something like that from happening,” Satterfield said, referencing an investigation that found the location of the pipe and heavy rains combined to cause the burst. “And where we identify hazards, we will be increasing our inspection of those areas of the pipeline system.”

Still, the sheer size of the project and the fact that SCS does not currently maintain any carbon pipelines mean the safety concerns will likely persist.

MORE BY JASON HARWARD
After heading to Rapid City for the debate, Gov. Kristi Noem left the state for a campaign event with gubernatorial candidate Kari Lake in Arizona. The move drew criticism from some who pointed to Noem's implication in September that recovery from back surgery would curtail her ability to travel for several months.

Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or jharward@forumcomm.com.

Related Topics: ETHANOL
Jason Harward covers South Dakota news for Forum News Service. Email him at jharward@forumcomm.com.
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