South Dakota Senate approves bill to strip local control over carbon pipelines

The South Dakota Senate, in a 23-11 vote on Feb. 21, 2024, approved SB 201, a bill to “provide new statutory requirements for regulating linear transmission facilities, to allow counties to impose a surcharge on certain pipeline companies.”

Two of the biggest aspects of the bill are: the provision for counties to obtain up to $1 per foot from carbon pipeline companies as long as the 45Q federal tax credits are available, and the removal of the rights of counties and townships to establish setback rules for carbon pipelines within their borders. Additionally, the bill included a clause to “declare an emergency” which means it would be enacted immediately upon signature from the Governor, thus taking away the citizens’ right to a referendum.

The bill will be heard in the House Commerce and Energy committee on Monday, Feb. 26, 2024 at 9 a.m. Central time.

As reported earlier in TSLN, the Senate Commerce and Energy Committee approved the bill 7-2. Many opponents testified in the Senate committee, and a standing room only crowd appeared to include many opponents who did not testify for the bill. Many opponents said they were greatly concerned about the elimination of local control due to the section that prevents townships and counties from establishing setback rules.

On the Senate floor the Senators sparred back and forth over similar concerns.

Proponents said that a carbon pipeline is crucial to the survival of South Dakota’s ethanol industry and, consequently, South Dakota’s corn industry.

Bill sponsor Senator Casey Crabtree, a director of economic development representing Brookings, Kingsbury, Lake and Miner Counties said that SB 201, along with HB 1185 and 1186 promote “the South Dakota way.”

He said those three bills work on a process that promotes fairness, respect and certainty for all involved.

“There are those who want to close down our borders to the national and global corn and ethanol markets, and those who see opportunity and are willing to work on a solution,” he said on the Senate floor.

“A rising tide lifts all boats,” said Crabtree, adding that SB 201 “fosters a brighter future for all of South Dakota.”

Representative Karla Lems, Canton, who serves Lincoln, Turner and Union Counties has been outspoken about her belief that carbon pipelines should not be allowed to use eminent domain. She has adamantly defended the rights of property owners to make decisions about their own land, and the rights of counties and townships to establish rules that fit their constituents.

Senate Bill 201, which strips away county and township control, is not the South Dakota way, she said. “There are four other states who have taken away local control in a similar manner. They are all blue states. Do we want to be a red state that goes down the same road of taking away local control?” she asks rhetorically.

Crabtree and other senators emphasized the segment of SB 201 that gives counties affected by a carbon pipeline the ability to assess a fee of up to $1 per foot to the pipeline as long as the pipeline is drawing from the 45Q tax credit.

“In the end, when that tax credit runs out, that provision is no longer enforceable,” Lems said.

Lems points out that Rep. Will Mortenson’s HB 1186 also gives affected landowners the right to assess up to a $1 per foot fee, as long as the tax credits are being utilized. So if both bills pass and are signed by the governor, counties and landowners can each potentially earn $1 per foot if they are impacted by the pipeline while carbon pipeline is collecting tax credits. This in exchange for the loss of local control over setback requirements.

Senator David Wheeler testified before the full Senate that, based on a legal analysis of U.S. code: a state authority may not adopt or continue in force safety standards for interstate pipeline facilities or interstate pipeline transportation. “That is federal law,” he said. The courts have interpreted the pipeline safety act broadly, referencing oil pipelines, and federal law has pre-empted the area, Wheeler said. “When federal government sets certain standards, the state and its subdivisions cannot get in there and do something different. We have to follow federal law,” he said. “It’s important for us to stay in statute. The counties don’t have setback authority,” he said. “SB 201 doesn’t take away authority from counties. Why? Because they don’t have the authority now,” he said.

Lems, however, disputes this interpretation, explaining that the US Department of Transportation Pipeline and Hazardous Materials Safety Administration wrote a letter in September in response to questions it had received about state and county authority over “the siting, design, construction, operation, and maintenance of carbon dioxide pipelines.”

In the letter, the PHMSA administrator says, “Therefore, the responsibility for siting new carbon dioxide pipelines rests largely with the individual states and counties through which the pipelines will operate and is governed by state and local law.”

Lems said this clearly gives authority to counties as well as states for setbacks and other requirements for carbon pipelines.

Senator Hoffman, representing Minnehaha County, explained on the Senate floor, that the PHMSA administrator clearly stated that counties can and should be involved in the rulemaking process for the pipeline development.
Because the Senate couldn’t achieve the 2/3 vote needed to approve the bill with the emergency clause included, the bill was amended to remove the emergency clause, giving it enough support to pass through the Senate.

Voting to support SB 201 were: Beal, Breitling, Crabtree, Davis, Deibert, Duhamel, Hunhoff, Klumb, Jack Kolbeck, Steve Kolbeck, Larson, Maher, Mehlhaff, Nesiba, Reed, Schoenbeck, Schoenfish, Stalzer, Tobin, Walsh, Wheeler, Wiik, Zikmund.

Voting against SB 201 were: Bolin, Bordeaux, Foster, Frye-Mueller, Hoffman, Johnson, Novstrup, Herman Otten, Pischke, Rohl, Wink.

Diedrich was excused.
Lems said that the package of bills including SB 201 and HB 1185 and 1186 “do not get to the heart of the matter” that she’s been hearing about for two years from her constituents.

“I hear from my voters: ‘no eminent domain for private gain,'” she said. “And the other thing is, we are a very red state that is really bowing to the green new deal. Is that who we are as South Dakotans?

“You have the federal government teaming up with industry, teaming up with a pipeline company with foreign investors. Summit Carbon Solutions wants to crisscross the heart of America, and get hooked up with these ethanol plants. What is that going to do when they are dependent on that to stay in business?”

The pipeline could eventually have control over the ethanol industry and the corn market, she believes.

Lems reported on other bills affecting landowners’ rights in regard to carbon pipelines.

Representative Hanson’s HB 1219 which called for no private carbon pipeline companies to use eminent domain died in the House of Representatives.

Representative Odenbach’s HB 1190 which was to establish public use criteria for purposes of condemnation proceedings died in the House Commerce and Energy Committee.

Representative Blare’s HB 1193, which would have required a company to obtain a permit before employing eminent domain, died in House Commerce and Energy.

Lems’ HB 1203 which deals with condemnation proceedings is still alive.