The South Dakota Supreme Court ruled on Aug. 21, 2024, that Summit Carbon Solutions has not demonstrated that it is a common carrier nor is it transporting a commodity.

This means that in the state of South Dakota, Summit Carbon Solutions, a company proposing to build a carbon sequestration pipeline through Iowa, Nebraska, Minnesota, South Dakota and North Dakota, will not be allowed to use eminent domain to force landowners to sign easements for pipeline development.

The court ruling also defends the plaintiff’s conservative interpretation of surveying. Summit, under a district court ruling, had in multiple situations, surveyed land without permission, in some cases causing extensive damage by digging trenches, boring deep holes, etc.

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Summit’s proposal includes sequestering carbon from ethanol plants and depositing it underground in North Dakota. The company would be eligible for 45Q tax credits for the pipeline project.

Many South Dakota legislators and ag organizations such as the South Dakota Corngrowers have promoted the pipeline, saying it is needed to help lower the carbon footprint of ethanol plants, to make the ethanol more marketable in regions such as the West Coast that could demand a more climate-friendly product. Some of the pro-pipeline advocates have supported the use of eminent domain, which would allow Summit to condemn property against the landowners’ will.

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Other legislators, ag groups and property rights groups including the South Dakota Stockgrowers Association opposed the use of eminent domain by a private company such as Summit Carbon Solutions. Many legislative battles ensued.

McPherson county farmer Mike Klipfel was a plaintiff in the case.

PROTECTING PROPERTY

Klipfel said he was present on Jared Bossley’s property when Summit surveyed without permission. “If anyone thinks that wasn’t a traumatic experience, you needed to be there. Summit had blocked off the roads, the sheriff was there keeping Bossley sequestered… Circuit Court Judge Sommers, in his ruling basically said Jared couldn’t protect his own property,” said Klipfel.

This week’s state Supreme Court ruling said surveying without landowners consent should consist of minimally invasive superficial inspections that at most cause minor soil disturbances.

Klipfel is thankful that the ruling removes Summit Carbon Solution’s assumed right to use eminent domain. “Under this ruling, they are not a common carrier and they are not transporting a commodity,” he said.

After refusing Summit’s easement offer multiple times, Klipfel’s sheriff had served him condemnation papers for his property, which led him to seek legal counsel.

“Eminent domain is an aggressive law. It says ‘we are going to condemn your property and take it as our own,’ that’s a startling thing when you see it,” he said.

Summit told Klipfel that 70 percent of landowners in the state had already signed easements, but in reality, 67 percent of affected landowners in McPherson County did not sign voluntary easements and thus were served condemnation papers, said Klipfel.

A BIG WIN

District 16 Representative Karla Lems, a business owner and landowner from Canton, said this is a big win for South Dakota’s property owners.

“We haven’t won the war, but we won a big battle this week,” she said. Summit approached Lems to sign an easement to allow the pipeline on her land, but thus far she has not agreed to the proposal.

Summit claims to have 70 percent of South Dakota land needed for the pipeline already under voluntary easements.

Lems said that in the Supreme Court decision, the justices concluded that Summit did not prove itself to be a common carrier, and because of that, it can’t invoke eminent domain to force landowners to sign easements. Additionally, it must survey respectfully and only with permission.

Lems said she doesn’t know if Summit will take the case to the federal Supreme Court. She believes that Summit may return with more information in an effort to prove that it is a common carrier of a commodity. She believes that in order to do that, they may have to discuss the possibility of using the carbon dioxide for enhanced oil recovery, an option that the company has thus far not divulged. As of now, the company says the carbon dioxide will be deposited underground and not utilized for other purposes.

If the carbon dioxide is to be used for enhanced oil recovery, the company would be eligible for a lesser tax credit – $60 per ton of C02 compared to $85 per ton for carbon sequestration under the Inflation Reduction Act.

Lems voted for several landowner rights bills during the 2024 legislature that ultimately did not pass.

Klipfel has spent thousands of dollars defending himself and his property, in addition to countless hours of his time.

“It’s hard on your personal life, too. They are trying to wear you down,” he said. “But yesterday’s state Supreme Court ruling gave us a shot in the arm,” he said.

State legislators are working on bills to strengthen property owners rights in the state of South Dakota, said Klipfel.

“The current law is bad. All Summit needed was a website saying they were a pipeline company. They didn’t need a permit from the Public Utilities Commission to file condemnation papers on me,” he said.

“It’s pretty exciting to be here making property rights one of the most important topics in our state,” said Klipfel.