Eminent domain bill in South Dakota moves forward following intense testimony
A proposal from Rep. Karla Lems, of Canton, to strip carbon sequestration pipelines of the all-important common carrier designation moved forward 8-5.
PIERRE, S.D. — It was dead silent in the South Dakota State Capitol’s largest committee room, turned hot and stuffy as several dozen South Dakota landowners, lawmakers and lobbyists looked on at Rep. Rebecca Reimer, the fifth-to-last committee member to consider a vote on House Bill 1133.
At the time, late in the morning on Feb. 6, the vote on the 13-member House State Affairs committee stood at three in favor and five opposed, with the potential unintended consequences of changes to eminent domain law giving lawmakers pause.
Months of lobbying legislators and swiping back and forth in the press between the groups on either side of the carbon pipeline issue, and one hour of the regimented proponent and opponent dueling of legislative committees, had led up to a simple choice — yay or nay.
Moments later, the proposal to clarify eminent domain law and carve-out carbon sequestration pipelines from accessing eminent domain had moved past the committee made up of many of the House’s top lawmakers by a vote of 8-5.
Reimer, a Republican from Oacoma, had broken her silence after a lengthy pause: “yay.”
“What was going through my head was private business versus landowners, the voter who put me in the chair, and the precedent it sets going forward,” Reimer said. “As I understand it, eminent domain wasn’t meant for private business use.”
House Bill 1133 was one of four bills related to the issue of proposed carbon pipelines seeking to go through the state of South Dakota — in total, two of these four were successfully passed.
Framed by House Majority Leader Will Mortenson in a press conference last week as a debate pitting “property rights” against “progress,” the fundamental consideration behind these bills was whether the ability to sell ethanol in low-carbon fuel markets was worth allowing a private company to pipe liquefied carbon underground for hundreds of miles in South Dakota, overruling the wishes of a small yet vocal contingent of landowners in the state.
“With the green movement, our industry that even agriculture is at a crossroads. If ethanol and the ethanol industry fails to lower its carbon footprint, we can write our own obituary,” said Jim Seurer, the CEO of Glacial Lakes Energy, a large ethanol company in the state.
He was one of several energy executives implying or outright claiming that blocking the carbon sequestration pipelines would have a cost of billions in related investments to the state.
In short, capturing carbon given off in the ethanol process could allow the fuel to be viewed as less environmentally destructive by the federal government and a growing number of states offering credits for low-carbon fuels.
Landowners retorted that this was not about ethanol; rather, it was about property rights and protecting land that their family had passed down for generations.
“At first, we felt all alone with this issue. We then started connecting with landowners across their state who are opposed to eminent domain for private gain,” Wendy Schulz, a landowner from Codington County, said during an emotional testimony. “We knew we were far from alone. We feel it is wrong for landowners to pay for a lawyer and lobby to protect our land rights.”
Lawmakers consider ‘unintended consequences’ of carbon pipeline legislation
During the consideration of the black-and-white text in front of them, it was drab legislative minutiae — rather than personal stories of family farm heirlooms or promises of an ethanol boom — that dominated the discussion among lawmakers on the first four of six planned pipeline bills in front of the committee. The other two were pushed to later in the day due to time constraints.
As has been the case in most committee rooms throughout the first weeks of the session, a bill’s cause of death usually comes from concerns of “unintended consequences” or poor construction, rather than over-arching disagreements with the identified problem or the proffered solution.
For example, in House Bill 1133, Rep. Karla Lems, of Canton, sought to remove the carbon dioxide pipelines from the statutory definition of “common carrier,” which in state law generally refers to railroads and commodity pipelines. If successful, the change would likely make it impossible for the pipeline to get eminent domain on private land or even public “right-of-ways,” strips of public land on either side of public roads.
Current statute says eminent domain and other privileges are granted to common carriers of commodities. The proposal from Lems would exclude from the definition of commodity anything intended for “geological storage” or that “allows its owner, shipper, or the shipper’s customer to qualify for a tax credit or a direct payment.”
That change and its potential effect on other industries supported by tax credits looked like it might derail the legislation.
“Where it talks about the tax credit or direct payment, if we're going to start stopping entities from doing business because they're going to receive a tax credit for it, I have a huge hesitation because where would that ever stop?” said Rep. Becky Drury, of Rapid City.
Other arguments against the bill included Rep. Roger Chase, of Huron, who claimed that carbon co-products had all the markings of a commodity, labeling the bill as overreach.
But Mortenson, a Pierre-area legislator and the committee’s chair, disputed the overarching categorization of carbon as a commodity, saying it was more context-dependent, and that Summit Carbon’s plan to sequester the substance in an underground geological formation in North Dakota would not be a commodity in the generally understood sense.
“I think what we're doing in this bill is bringing the plain meaning to the statute. Because if commodity means anything you put in the pipeline then it means nothing at all,” Mortenson said. “In that case, we should just say any pipeline for any purpose gets eminent domain. But if it's going to say commodity, I think we ought to mean commodity.”
Bills focus on eminent domain law, permitting process
For the better part of two years, companies planning to build a network of pipelines in different parts of the Midwest, Summit Carbon and, a bit later, Navigator CO2, have begun the lengthy process of negotiating with landowners along the routes in eastern South Dakota.
Summit Carbon says nearly 60 percent of landowners along the planned 700-mile route in South Dakota have signed easements, legal documents that allow the pipeline to cross private land in exchange for payment. Jake Kessner, a spokesperson for the company, says more than $50 million has been given to South Dakota landowners so far.
But proponents of several proposals that either change eminent domain law entirely or set voluntary easement thresholds at 80% or 90% before eminent domain can be used say many of these easements have been signed due to the pervasive threat of eminent domain from the pipeline companies.
“The conversation when the threat of eminent domain is out there whether implied or direct, is, ‘Honey, we can't do anything anyway, so we might as well just sign this document,’” said Brian Jorde, an environmental lawyer based in Omaha representing some 400 landowners in the state against Summit Carbon and Navigator. “And that's a conversation it's not fair for South Dakota taxpayers, landowners and voters to be having. The playing field needs to start to be leveled, so at least it's a negotiation.”
Opponents argued the changes to pipeline law would be “changing the rules in the middle of the game,” and would allow a very small portion of landowners to hold up projects with wide economic benefits to the state.
In response, proponents pointed out that Summit Carbon and Navigator CO2 have often implied or outright stated that their goal is signing voluntary easements with every landowner; in that case, those in favor of restricting eminent domain power said, why would removing the right to eminent domain change their plans at all?
But, as Public Utilities Commissioner Chris Nelson explained during his campaign last year, eminent domain is a decision left to the courts only after the commission has permitted the pipeline. It was on the permitting step where other proposals in front of the House State Affairs committee looked to change the law.
Another attempted change to the permitting process, House Bill 1224, also brought by Rep. Karla Lems, of Canton, would have required 90% of landowners along the route to approve a project before an application with the PUC could be filed. On that proposal, too, concerns over the effect that this would have on infrastructure projects unrelated to carbon sequestration led to it being voted down.
“90% is totally unreasonable,” Chase, who opposed all four of the bills in front of the committee during the morning session, said. “If we pass this bill we will never have another project moving forward in South Dakota.”
In the afternoon session, where the final two bills on the docket were heard, pipeline safety became another topic added to the list of targets by opposed landowners and aligned legislators and lawyers. House Bill 1178 sought to delay a hearing from the PUC until new rulemaking from the federal agency tasked with regulating pipelines has been handed down on safety provisions for carbon sequestration pipelines, among other alterations to PUC process.
“Once again, I think all the ideas presented are bad for business, and none of these ideas in the bill promote safety,” said Trevor Jones, who works in the regulatory affairs division with Summit Carbon Solutions. “They just promote delay. The more you delay, the less welcome South Dakota is for businesses.”
The pipeline safety discussion led to the closest vote of the day, a 7-5 decision to reject the proposal.
While several of the pipeline and eminent domain bills were derailed, Lems felt the committee hearing was a good start, and she said the strong showing of landowners was a reminder to lawmakers that there is intense interest in the subject among those affected.
“[House Bill] 1133 was the big bill that we really wanted to get through today. And it's a win for the landowners,” Lems said. “This whole thing, everything that was laid out today is really about eminent domain. And it really is the landowner’s bills.”
Jason Harward is a Report for America corps reporter who writes about state politics in South Dakota. Contact him at 605-301-0496 or email@example.com.