Senate panel moves to limit local authority in pipeline regulation

An audience listens to a hearing on proposed pipeline legislation at the Capitol in Pierre on Feb. 15, 2024. (Joshua Haiar/South Dakota Searchlight)

A bill limiting the right of counties to regulate pipeline setbacks advanced out of a state Senate committee on Thursday morning.

Senate Bill 201 would bar counties from enacting local zoning rules strict enough to regulate gas or liquid pipelines out of existence, but would also allow counties to levy a per-foot surcharge on pipeline companies and codify certain landowner protections for things like disrupted drain tile.

The bill passed the Senate Commerce and Energy Committee on a 7-2 vote , taken before a packed house of supporters and opponents, the latter of whom applauded loudly enough after one round of testimony to cause the chair to call for order.

The crowd and its occasional emotion were animated by one of the most controversial topics to whisk through the Capitol halls both this year and last. In 2023, there were two carbon dioxide pipeline projects in the works for South Dakota, both of which would transport carbon produced by ethanol plants to sites in other states for underground sequestration. Doing so would open the door to billions in federal tax credits for the pipeline companies and their partners.

Since last year’s session, one of those companies – Navigator CO2 Ventures – has tapped out. The Public Utilities Commission denied its permit last fall, and the announcement of the project’s shuttering came shortly thereafter.

In the process of making its decision on the pipeline, the commission said it would not overrule restrictive county zoning ordinances that the pipeline companies have argued amount to a ban of their business.

Public Utilities Commissioner Kristie Fiegen participates in a hearing July 25, 2023, in Fort Pierre on a permit application for the proposed Heartland Greenway carbon dioxide pipeline. (Joshua Haiar/South Dakota Searchlight)

The remaining pipeline company seeking a route through South Dakota, Summit Carbon Solutions, had representatives and supporters on hand for Thursday’s hearing.

The pipeline debates taking place this year in Pierre have also included more discussion of and comments from another economic development project linked to carbon sequestration: a sustainable aviation fuel plant proposed for Lake Preston by a company called Gevo.

Gevo would use corn to create its fuel, and the company has said the project is worth at least $1 billion.

Sen. Casey Crabtree, R-Madison, is the bill’s prime sponsor. He said his proposal strikes a balance between South Dakota’s respect for property rights and its need for economic development.

“The best kind of compromise: One that does not compromise our South Dakota values,” Crabtree said.

Backers: Ethanol’s future tied to carbon sequestration

Summit and Gevo representatives each testified that allowing local governments to set required distances between buildings and pipelines inappropriately usurps federal and state regulatory authority. They also argued that local ordinances enacted as they seek permits and negotiate right-of-way payments from landowners along proposed pipeline routes amount to “changing the rules of the game” in a way that unfairly upends project planning.

For Gevo in particular, the stakes were made clear on Thursday: Without a pipeline, the company will take its business elsewhere.

“There are other states in the nation that have embraced carbon capture and sequestration, and we have identified other sites,” said Kent Hartwig, director of government affairs for Gevo.

Brett Koenecke, the South Dakota lawyer for Summit, told lawmakers that the “byzantine” regulations created at the county level have created a “Balkanized” regulatory framework that essentially papers the pipeline project out of existence.

County commissioners are governing as activists, Koenecke said.

“You can look at the Facebook posts of the anti-project people and find the county commissioners posting actively in those areas,” he said. “And so I’m here to tell you there’s no pathway forward for this project that involves discretion at the county level.”

Several agricultural and economic development lobbyists also testified in favor of the bill. Carbon sequestration, they said, as incentivized by the federal government in the interest of lessening the climate impact of heat-trapping carbon dioxide, is the way corn farmers will thrive in a country where vehicles are becoming more fuel efficient or going electric. Two out of every three rows of South Dakota corn is used to produce ethanol.

Higher-value sustainable aviation fuel and tax payouts for existing ethanol operations will keep corn alive, they said. If South Dakota makes it too difficult to take advantage of carbon credits, other states will be happy to fill the void and reap the benefits.

“We’re not only competing with other industries, but we’re competing with other ethanol plants,” said Matt McCauley of the South Dakota Ethanol Producers Association.

Opponents: Local control sacred, works for citizens

Amanda Radke, a pro-farm blogger and speaker, drew cheers for her testimony on SB 201, a measure she said would strip property owners of their rights through state government fiat. She argued that New York, California, Michigan and Illinois have rules similar to those proposed in SB 201, and asked the committee if they wanted South Dakota to join that club.

Amanda Radke, an agricultural blogger and speaker, testifies on legislation about carbon pipelines on Feb. 15, 2024, in Pierre. (Joshua Haiar/South Dakota Searchlight)

She isn’t an affected landowner, she said, but rather an advocate who stands with landowners opposed to the pipeline.

“To put the boot on the neck of these families is wildly inappropriate,” Radke said.

Brown County Commissioner and former lawmaker Drew Dennert was on hand to defend his county’s decision to pass a restrictive zoning ordinance.

He spoke of a local who’d be unable to expand a ranch if Summit were to complete its project, as he wouldn’t be able to build within 1,000 feet of the area on his property under which the pipeline might run.

“As commissioners, we acted on behalf of our citizens and in the best interests of our county’s unique situation,” Dennert said. “Our ordinance makes sense for our community.”

Lawmakers push bill to full Senate

Sen. Crabtree countered during his rebuttal that the bill as amended creates a host of landowner and county protections, including causes of action for disrupted drain tile and the counties’ ability to charge pipeline companies annual fees. Drain tile is used under farm fields to remove excess moisture.

The law does not leave counties flat-footed or leave landowners with no recourse, he said.

“I would not have brought this legislation if I thought it did that,” Crabtree said.

Sen. Lee Schoenbeck, R-Watertown, moved to pass the bill onto the Senate floor, saying the state should not allow local activism to endanger agriculture’s viability.

“This is about trying to bring order to these projects that are really important to agriculture in South Dakota,” Schoenbeck said.

The bill’s emergency clause, which would allow it to take effect immediately with the governor’s signature rather than on the typical date of July 1, would address “the timeliness issue.” Without order and certainty, Gevo could walk away.

Crabtree stressed that the emergency clause signals the importance of carving out rules of the road in short order.

“Putting those in as quickly as possible is important for all sides,” Crabtree said.

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