Carbon Pipeline Law Faces SD Vote

OMAHA (DTN) -- A voter referendum on the regulation of carbon pipelines in South Dakota is pitting landowners against a pipeline project considered a key cog in helping ethanol plants lower their carbon emissions.

Along with everything else on the ballot Nov. 5, voters in South Dakota will vote on Referred Law 21 -- whether to keep or reject a state law, Senate Bill 201, that passed the State Legislature earlier this year.

RL-21 is being closely followed as permit battles over a 2,000-mile carbon pipeline are also tied up in courts and state commissions across five states.

The South Dakota law, if it remains in effect, allows counties to impose a tax on carbon pipelines of $1 per foot. The law also imposes requirements for pipeline setbacks, minimum depth, rules for handling drain tiles, potential leaks and indemnities to landowners. The law also requires the state's Public Utilities Commission to limit counties' authority to set tighter restrictions on pipelines. The law was dubbed by lawmakers as a "landowner bill of rights," but critics dispute that take.

"Our issue is it really strips away the ability for individual landowners to go to their county commissions and plead their case for setbacks and siting and routing plans," said Amanda Radke, a rancher, farmer and writer in Mitchell, South Dakota, who has become a social media advocate for opponents of RL-21 and Senate Bill 201. "The 300 county commissioners in the state of South Dakota would no longer have a voice. It creates a blanket easement for this one company that can be applied county-by-county."

After being passed and signed by Gov. Kristi Noem in March, opponents got 36,000 signatures across every county to put RL-21 on the ballot. A vote in favor of RL-21 would allow Senate Bill 201 to remain enforced. A vote against RL-21 would likely spur the South Dakota Legislature to consider other options.

The driver behind the ballot measure is Summit Carbon Solutions, which has been working for three-plus years to line up construction permits in Iowa, Minnesota, Nebraska, North Dakota and South Dakota. Summit has 57 ethanol plants across the five states lined up to send as much as 12 million metric tons of carbon dioxide to a geological formation in North Dakota where the carbon would be injected into the ground.

Sinking the carbon in the ground could generate as much as $85 a ton for Summit under the 45Q tax credit. For ethanol producers, piping away the carbon rather than emitting it would dramatically lower their carbon intensity scores for producing Sustainable Aviation Fuel or selling biofuels into states that have low-carbon fuel standards.

The South Dakota Public Utilities Commission (PUC) in September 2023 denied Summit's first permit application, stating it would violate state and county ordinances. The PUC at the time indicated Summit could not proceed without overriding county setbacks. Summit immediately announced it would refile, and the PUC is expected to take up the permit sometime next spring. Senate Bill 201 sets standards but also offers a path forward for the project.

CRITICS ORGANIZE

Opponents of Summit's project in multiple states are closely watching the campaign around RL-21. In Iowa last week, landowners waiting for their own Supreme Court hearing were calling South Dakota voters to urge them to vote "no" on the measure.

"My landowner clients in all the states are watching and hoping all South Dakotans vote 'No' on anti-landowner legislation RL-21," said Brian Jorde, an Omaha attorney who has tried multiple landowner court cases over Summit. "If RL-21 remains the law, that means local ordinances are totally preempted and are null and void if they relate to CO2 pipelines. Folks are fearful this erosion of constitutional rights in favor of big business is the slippery slope signaling the end of the family farm and ranch as we know it."

The South Dakota Property Rights and Local Control Alliance has been organizing meetings across the state to rally opposition.

A poll conducted by pipeline opponents Bold Alliance in September cited 65% of South Dakota voters oppose RL-21.

CORN GROWERS BACK NEW LAW

DaNita Murray, executive director of the South Dakota Corn Growers Association, said SDGA supports RL-21 to pass. The group supported Senate Bill 201 in the state legislature.

"So that's where we landed. There's a backdrop here and a couple of big macro questions that have nothing really to do with Senate Bill 201."

One of those macro challenges is the state of the farm economy. Grain farmers are facing high input costs along with lower commodity prices.

"2025 -- at best it will be a very pivotal year. At worse, it is going to be bad."

Congress also passed the Inflation Reduction Act (IRA) in 2022 that included incentives to help spur biofuels to be used for aviation. That also includes a suite of tax credits for aviation fuel but also lowering the carbon intensity of biofuels and agriculture. Murray said multiple black swan events over the past four years have highlighted the value of producing domestic ethanol -- and there are more incentives for converting ethanol to Sustainable Aviation Fuel.

"That fuel is getting produced, and it might as well get produced here in South Dakota," Murray said.

DEBATE OVER EMINENT DOMAIN

Critics of RL-21 have claimed rejecting it also would prevent Summit from being granted eminent domain authority. Murray said that's a false claim because nothing in Senate Bill 201 mentions eminent domain.

"They really have nothing to do with one another," Murray said. "The authority to use eminent domain is not anything that (Senate Bill) 201 touched or grants or changes. But they are smart, so they tied them together. People have a lot of heartburn -- as they should. Eminent domain should not be taken lightly. Unfortunately, some people have the misunderstanding that if they vote against Senae Bill 201 or vote down Referred Law 21 they are in some way saying 'No' to eminent domain."

Phrases on billboards such as "No eminent domain for private gain" have distorted the debate and conversations around RL-21 and what it actually does, Murray said. Voting down the law, for instance, doesn't mean Summit will not receive a permit.

"There's also a myth that if someone votes against (RL-21) that the pipeline won't come to South Dakota," Murray said. "It's not going to stop the pipeline. It can still move forward, meaning the company can still apply for its permit with the PUC under existing law."

While there's the unresolved debate about eminent domain, Radke said there is a concern that voters won't know which way to vote given that the law is called "the landowner bill of rights."

"This doesn't address our biggest concern, which is eminent domain," Radke said. "So, it's really disingenuous to call it a landowner right bill."

Radke got involved in the pipeline fight two years ago when she started getting calls from landowners who felt Summit was trying to coerce them into signing easements and threatening to use eminent domain.

"I never in a million years imagined it would be coming to my backyard, but within the last couple of months, the route has expanded and now it's coming to my community as well," Radke said.

Radke said the groundswell from the campaign has led to more focus in rural areas on property rights. "As we get closer to the legislative session, there is a strong movement to make really serious and meaningful eminent domain reform in the state of South Dakota. That hasn't been done before."

The South Dakota Corn Growers operates on a voluntary checkoff. Murray said she has heard from at least some corn growers who are not happy the group backs the bill and supports the pipeline. That has led to producers requesting checkoff reimbursements.

"Certainly, some people put their money literally where their mouth is and we totally understand that, but, yeah, it's a passionate issue," Murray said.

Sabrina Zenor, a spokeswoman for Summit, said the company isn't involved in the initiative in South Dakota and has not donated to the campaign to support it. Lee Blank, Summit's CEO, told DTN at an ethanol event in August that Summit supports RL-21 and sees it as a way forward to work with local landowners and counties.

STATE OF PLAY IN IOWA, NORTH DAKOTA

While the ballot measure plays out in South Dakota, the Iowa Supreme Court held a hearing earlier this month brought by Summit over landowners refusing to allow the company to survey their property. Nearly 40 Iowa Republican lawmakers also have filed a lawsuit against the Iowa Utilities Commission, arguing the commission's permit granted to Summit was unconstitutional. The Iowa permit gave Summit the ability to use eminent domain with uncooperative landowners in that state.

In North Dakota, the state's Public Service Commission first denied Summit's permit but allowed the company to amend its application and come back. The North Dakota Monitor reported on Oct. 7 that the commission directed staff to draft a new order for the commissioners to consider.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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