Betty Jean Strom Trust v. SCS Carbon Transport, LLC

Reversing circuit courts, the South Dakota Supreme Court found that it was premature to determine that the developer of a planned pipeline network to transport carbon dioxide (CO2) to a carbon sequestration site in North Dakota was a common carrier with the power of eminent domain. The court found that the record did not demonstrate as a matter of law that the developer—SCS Carbon Transport, LLC (SCS)—was holding itself out to the general public as transporting a commodity for hire. The court said that factual disputes remained, including as to whether SCS took ownership of the carbon dioxide to be transported (and would thus be a private carrier). The court found, moreover, that the existing record suggested that “CO2 is being shipped and sequestered underground with no apparent productive use” and therefore would not qualify as a commodity. The court noted SCS’s argument that stored CO2 has value because of carbon-offset markets and federal subsidies. The court further noted that the record suggested “the economic item of value at play here may be the tax credit generated by the sequestration of the CO2, a determination which is driven by federal energy policies.” The court also noted that legislatures in other states had been responsible for policy decisions that CO2 was a commodity due to its potential industrial applications. The court said it was “unwilling to make such a significant determination” here based on the undeveloped record, “particularly one that is heavily bound up in policy considerations.” In addition to its decision regarding the common carrier questions, the court found that the South Dakota landowners who challenged the developer’s exercise of eminent domain powers were entitled to discovery. The court also found that a South Dakota law that authorized pre-condemnation surveys should be narrowly construed to permit “only minimally invasive superficial inspections” and that the law, if narrowly construed, would not violate federal or state constitutions.