SD Supreme Court Sides With Landowners

LINCOLN, Neb. (DTN) -- Lower courts in South Dakota erred in ruling Summit Carbon Solutions is a common carrier able to exercise eminent domain to acquire and inspect land for a planned 2,000-mile carbon pipeline, the South Dakota Supreme Court ruled Thursday.

In a 42-page ruling handed down in an ongoing legal fight mounted by more than 50 landowners in the state, the state's highest court said the company had not presented enough evidence to show it was a common carrier.

Under state law, a common carrier holds itself out to the general public as transporting a commodity for hire.

The South Dakota Supreme Court said it was unclear whether the carbon dioxide that would be transported from ethanol plants to a sequestration site would be a commodity.

South Dakota landowners along the proposed route in the eastern part of the state along with Summit Carbon Solutions, filed six lawsuits dating back to 2022.

The company sued for access to survey various tracts of land, while landowners challenged the company's status as a common carrier. Summit Carbon Solutions was granted summary judgement on all the issues in the cases filed and the landowners filed an appeal.

The state's supreme court this week sent the cases back to the lower courts for further proceedings on the common carrier question.

"We reverse the circuit courts' grants of summary judgment on the common carrier issues," the South Dakota Supreme Court said on Thursday.

"SCS's ability to conduct pre-condemnation surveys depends on whether it is a common carrier vested with the power of eminent domain. However, in this early phase of the litigation, the record does not demonstrate that SCS is holding itself out to the general public as transporting a commodity for hire."

Brian E. Jorde, an attorney with Domina Law Group in Omaha representing landowners in the case, told DTN the landowners want the pipeline to avoid South Dakota.

"South Dakotans are thankful for the supreme court's thoughtful analysis and siding with landowners and it is gratifying for landowners to be vindicated by the supreme court after three years of fighting these issues," he said.

"The ball is in Summit's court, but we suggest routing around South Dakota."

SUMMIT RESPONSE

Summit Carbon Solutions told DTN it was evaluating the ruling and "looks forward to providing the information requested to the district court that reaffirms our role as a common carrier, and that CO2 is a commodity."

The company said the economic effect of carbon capture, utilization and storage on rural America is "significant" and will "greatly benefit agriculture and farmers."

The pipeline is expected to capture carbon from 57 ethanol plants in Iowa, Minnesota, Nebraska, North Dakota and South Dakota.

Summit was initially created to capture the 45Q tax credit for carbon capture and sequestration. The Inflation Reduction Act, signed into law two years ago expanded and extended the value of the 45Q credit. At the same time, ethanol plants are trying to qualify for the 45Z Clean Fuels Tax Credit and the sustainable aviation fuels market.

Summit has faced organized opposition in multiple states and saw initial permit requests denied. The company still plans to launch construction in 2025 and begin operations in 2026.

COURT'S OPINION

A legal question presented to the court was whether land inspections conducted by pipeline companies are unconstitutional takings of property without just compensation.

In its ruling, the court held that state law authorizes "only minimally invasive superficial inspections" of land by Summit Carbon Solutions.

"Based on this interpretation, we conclude that the limited pre-condemnation surveys authorized by SDCL 21-35-31, as strictly interpreted herein, do not violate the federal or state constitutions," the court said.

The pipeline project is expected to disturb about 6,550 acres in South Dakota, consisting of mostly crop production and pastureland acres in Beadle, Brown, Clark, Codington, Edmunds, Hamlin, Hand, Hyde, Kingsbury, Lake, Lincoln, McCook, McPherson, Miner, Minnehaha, Spink, Sully and Turner counties.

ROAD AHEAD

Litigation ahead will focus on whether Summit Carbon Solutions is considered a common carrier under eminent domain law. The court said landowners have the right to discovery in the case to answer that question.

"Based on the record before us, SCS has also failed to establish that the CO2 featured in this case is a commodity," the state supreme court said.

"SCS notes that the federal government and several states including Louisiana, Oklahoma, Mississippi, North Dakota and Nebraska, classify CO2 as a commodity."

The company argued that CO2-based products including fertilizers could be worth up to $1 trillion by 2030, making CO2 a commodity. Even CO2 stored underground would have value in carbon-offset markets and in federal subsidies.

Read more on DTN:

"Summit CEO: Carbon Capture Critical," https://www.dtnpf.com/…

"Ag Secretary Vilsack Promotes Ethanol as Key to Sustainable Aviation Fuel Amid Policy Debates," https://www.dtnpf.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on social platform X @DTNeeley

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