Betty Jean Strom Tr. v. SCS Carbon Transp.

1

2024 S.D. 48

BETTY JEAN STROM TRUST, RITA BROWN, and CRAIG AND LISA BASLER FAMILY TRUST, Plaintiffs and Appellants, v. SCS CARBON TRANSPORT, LLC, a Delaware Limited Liability Company, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee, PATRICIA K. DEEG TRUST, Plaintiff and Appellant, v. SCS CARBON TRANSPORT, LLC, a Delaware Limited Liability Company, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee.

PETER HELFENSTEIN, JR., ROTT FARMS, INC., KETTERLING FARM, LLC, VILHAUER LAND LIMITED PARTNERSHIP, BRIAN HOFFMAN, THE DAVID AND VALERIE RATH LIVING TRUST, COLIN AND MARY BETH HOFFMAN, JEROME G. HOFFMAN, MICHAEL AND NANCY KLIPFEL, ALDEN AND WILMA FLAKOLL, SHANTEL C. SCHUMACK, LEROY AND JOAN WEISZHAAR, and WADE AND JUDY WEISZHAAR, Plaintiffs and Appellants, v. SCS CARBON TRANSPORT, LLC, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee, SCS CARBON TRANSPORT, LLC, Plaintiff and Appellee, v. GERALDINE H. SAYLER JORDRE, DENNIS WOLFF, QUINTON WOLFF, R&C FEICKERT LAND LLC, REBECCA D. MICHAELSOHN, DAVID MELLAND, ROTT RANCH LIMITED PARTNERSHIP, THE ROGER E. MEYER AND ELIZABETH I. MEYER REVOCABLE LIVING TRUST, SUSIE K. TREFTZ, PAMELA KESSLER, GARY AND SHIRLEY WOLFF LIVING TRUST, WILLARD GOESHEL, LARVINA W. MEIER, KEN STUGELMAYER, MARSHA M VOSSLER, THE MARK M. VOSSLER AND MARSHA M. VOSSLER REVOCABLE TRUST, MARILYN D. NELSON, MARK THOMPSON, THE ESTATE OF ALBERT EUGENE ERDMANN, CHARLES E. SCHAUNAMAN, JEROME R. WAHL, THE VIRGINIA L. BREITAG LIVING TRUST, and SIEH FARMS, LLC, Defendants and Appellants, BRAUN FAMILY TRUST 2020, B&L FISCHBACH FARMS, MARGARET ELLETT LIVING TRUST, KEN OLSON TRUST 2010, OLSON FAMILY TRUST 2019, FRANCOLI FAMILY LIMITED PARTNERSHIP, FISCHBACH REAL ESTATE LP, ED AND JOELL FISCHBACH, ARMADALE LIMITED PARTNERSHIP, PAUL FISCHBACH TRUST 2012 AND DAWN FISCHBACH TRUST 2012, J&S PARTNERSHIP, MYRON O. HAMMER CREDIT SHELTER TESTAMENTARY TRUST, and JAMES AND ALTA SMITH, Plaintiffs and Appellants, v. SCS CARBON TRANSPORT, LLC, a Delaware Limited Liability Company, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee JARED BOSSLY, BOSSLY REAL ESTATE LIMITED PARTNERSHIP, KENNETH AND DIANNA SHAFER, ESTATE OF DONALD A. SCHAUNAMAN, KIRK SCHAUNAMAN, JOYCE DAHME, TODD AND DONNA ROZELL, SCOTT ROZELL, DENNIS AND JEAN HASELHORST, MILTON AND RHONDA HASELHORST, SETH KLIPFEL, and MICHAEL AND NANCY KLIPFEL, Plaintiffs and Appellants, v. SCS CARBON TRANSPORT, LLC, a Delaware Limited Liability Company, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee, DELORES SCHUMACHER REVOCABLE TRUST, and JOHN AND STEPHANIE JUNG, Plaintiffs and Appellants, v. SCS CARBON TRANSPORT, LLC, a/k/a SUMMIT CARBON SOLUTIONS, Defendant and Appellee.

Nos. 30317-r-JMK, 30338-r-JMK

Supreme Court of South Dakota

August 21, 2024

ARGUED MARCH 19, 2024

APPEAL FROM THE CIRCUIT COURT OF THE THIRD JUDICIAL CIRCUIT BEADLE COUNTY AND LAKE COUNTY, SOUTH DAKOTA THE HONORABLE PATRICK T PARDY Judge

APPEAL FROM THE CIRCUIT COURT OF THE FIFTH JUDICIAL CIRCUIT MCPHERSON COUNTY, SPINK COUNTY BROWN COUNTY, AND EDMUNDS COUNTY, SOUTH DAKOTA THE HONORABLE RICHARD A. SOMMERS Judge

BRIAN E. JORDE of Domina Law Group Omaha, Nebraska NICHOLAS G MOSER of Marlow, Woodward & Huff Yankton, South Dakota CHRIS HEALY Vermillion, South Dakota Attorneys for appellants.

BRET A. DUBLINSKE of Fredrikson & Byron, P.A. Des Moines, Iowa BRETT KOENECKE JUSTIN L. BELL CASH E. ANDERSON CODY L HONEYWELL of May Adam Gerdes & Thompson Pierre, South Dakota BRIAN D. BOONE MICHAEL R. HOERNLEIN MATTHEW P. HOOKER of Alson & Bird LLP Charlotte, North Carolina Attorneys for appellees.

OPINION

KERN Justice

[¶1.] SCS Carbon Transport, LLC (SCS) is planning to develop a pipeline network to transport carbon dioxide (CO2) through South Dakota. Several landowners (Landowners) along the proposed route refused to allow SCS pre-condemnation survey access, which SCS claims is authorized by SDCL 21-35-31. Landowners sued in both the Third and Fifth Judicial Circuits, seeking declaratory and injunctive relief to prevent the surveys. These proceedings resulted in a consolidated appeal from six lawsuits filed by Landowners and one by SCS. Two cases were filed in the Third Circuit: CIV 22-64 (Strom) and CIV 22-129 (Deeg). Five cases were filed in the Fifth Circuit namely: CIV 22-14 (Helfenstein), CIV 22-47 (Braun), CIV 22-253 (Bossly), CIV 22-20 (Schumacher), and CIV 22-18 (Jordre).

[¶2.] All cases except for Jordre-where SCS was the plaintiff and sought declaratory relief permitting survey access-involved similar claims challenging the constitutionality of SDCL 21-35-31 under the takings and due process clauses of the state and federal constitutions. Landowners also challenged SCS's status as a common carrier and, by extension, its right to exercise eminent domain power. After limited discovery, SCS moved for and was granted summary judgment on all issues in the cases filed in both circuits. Landowners appeal.

[¶3.] We reverse the circuit courts' grants of summary judgment on the common carrier issues. 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. It is thus premature to conclude that SCS is a common carrier, especially where the record before us suggests that CO2 is being shipped and sequestered underground with no apparent productive use. In addition, the circuit courts abused their discretion in denying Landowners' request for further discovery. The record demonstrates that SCS resisted Landowners' efforts to obtain depositions and documents that are of fundamental importance to the issues in this case. Within the scope of SDCL 15-6-26, Landowners are entitled to conduct depositions and have access to documents relevant to SCS's pricing terms and business model under conditions prescribed by the courts to preserve the confidentiality of the information.

[¶4.] On remand, in the event SCS is determined to be a common carrier, we also analyze the scope and constitutionality of SDCL 21-35-31. Mindful of our mandate to interpret the statute according to its plain meaning, and to do so in a fashion that preserves its constitutionality where possible, we conclude that the circuit courts partially erred in their analyses of the types of surveys authorized by SDCL 21-35-31. We hold that-absent landowner consent-the statute, to be interpreted as constitutionally valid, authorizes only minimally invasive superficial inspections that, at most, cause minor soil disturbances. In addition, we interpret SDCL 21-35-31 as incorporating our state constitutional guarantee of a jury determination of damages that are caused by pre-condemnation surveys. 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.

[¶5.] We reverse and remand for further proceedings consistent with this opinion.

Factual and Procedural Background

[¶6.] SCS is in the process of developing an underground pipeline network to transport CO₂. The network will include more than 2,000 miles of pipeline in five states: South Dakota, North Dakota, Iowa, Minnesota, and Nebraska. In South Dakota, the pipeline will travel through eighteen counties Beadle, Brown, Clark, Codington, Edmunds, Hamlin, Hand, Hyde, Kingsbury, Lake, Lincoln, McCook, McPherson, Miner, Minnehaha, Spink, Sully, and Turner. Once completed, the pipeline will be able to transport up to 12 million metric tons per annum of captured CO2 to an underground storage location in North Dakota. The CO2 will then be sequestered underground indefinitely. To date, more than 34 third-party facilities, including ethanol plants, have signed contracts or letters of intent with SCS for the transportation of CO2.^[1] The pipeline project is anticipated to disturb approximately 6,550 acres within South Dakota, comprising mostly agricultural properties used for crop production or pastureland.

[¶7.] On February 7, 2022, SCS submitted a siting permit application to the south Dakota Public Utilities Commission (PUC). This application was denied without prejudice on September 13, 2023, because the proposed pipeline route violated various county ordinances. In the meantime, beginning in June 2022, SCS began notifying landowners of its intent to conduct pre-condemnation surveys pursuant to SDCL 21-35-31 with or without landowner consent. Each of these notices contained a proposed date window for the survey, expressed a willingness to accommodate other dates more convenient to the landowner, and noted SCS's intention to "complete the survey work within 45-days following the 30-day written notice period."

[¶8.] According to SCS, three different types of surveys would be conducted along the pipeline route. The most common would be "minimally invasive, nondestructive inquiries to assess the land . . . involv[ing] the use of 'hand tools (e.g., spades, shovels, augers)'" that could result in "small soil disturbances at discrete locations." The second type--geotech surveys-would "assess underlying soil and rock conditions and 'utilize[] a track mounted drilling rig to create a small diameter hole into the soil to collect samples of subsurface soils and rocks.'" The small hole would be "backfilled with drill cuttings or with a cement/bentonite grout mixture." However, SCS claims there would be "no impact to normal land use after drilling is complete and the hole is backfilled."

[¶9.] Finally, "deep dig" surveys would be necessary for properties located within a floodplain to search for archaeological sites of cultural significance. These "involve the...