Summit Carbon Solutions CO2 Pipeline Toast: PUC Legal Staff Recommends Rejection of Permit

On Thursday, Summit Carbon Solutions withdrew its motion that the South Dakota Public Utilities Commission preëmpt county ordinances that might restrict the company’s ability to execute a state-issued permit to build its carbon dioxide pipeline across East River. The PUC rejected a similar preëmption motion from Navigator CO2 Ventures on Tuesday, along with Navigator’s complete pipeline application, so Summit evidently doesn’t think it has any better or unique argument for its own preëmption motion.

But in surrendering on preëmption, Summit has killed its own pipeline application. So says the PUC’s legal staff, which yesterday filed a motion to deny Summit’s application. That motion states that without preëmption, the pipeline’s proposed route will violate four counties’ ordinances and thus cannot receive PUC approval. The staff report refers to testimony from Summit chief operations officer Jimmy Powell and pipeline and facilities director Erik Schovanec:

Assuming the request to withdraw the Motion to Preempt is granted, the Applicant’s proposed route does not currently comply with all applicable laws. The proposed route violates four county ordinances:

1. Brown County
   1. Mr. Jimmy Powell states: “[t]he ordinance’s 1,500 ft. setback requirement are not only unreasonably restrictive as applied to the proposed route, they prohibit SCS’s proposed routes in Brown County.” Exhibit A34, pg. 4, lines 203-204.
   2. Staff notes that Brown County has a wavier process. However, without evidence that Summit has obtained the waivers from landowners and received approval from the Board of Adjustments, Summit’s proposed route violates the county ordinance. Exhibit A34a.
   3. Since Brown County requires the waiver and Board of Adjustment approval, if any intervening landowners in this docket are on, or adjacent to, the proposed route and have no interest in participating in the project at all, it would be impossible for the route to comply with Brown County’s ordinance.
2. Minnehaha County
   1. Mr. Jimmy Powell states: “[t]he setback requirements of Minnehaha County Ordinance are not only unreasonably restrictive as applied to the proposed route, they prohibit the proposed route altogether.” Exhibit A34, pg. 13, lines 281-282.
   2. Staff notes that Minnehaha County has a waiver process or Conditional Use Permit (CUP) process. However, without evidence demonstrating Summit has obtained a CUP or received waivers from landowners, the proposed route violates the county ordinance. Exhibit A34b.
3. Spink County
   1. Mr. Erik Schovanec states that SCS’s proposed route does not comply with the setback distances in Spink County. Exhibit A46, pg. 7, lines 5-7.
   2. Staff notes that Spink County has a similar process as Minnehaha County. However, without evidence demonstrating that Summit has received a CUP from Spink County or obtained waivers from landowners, the proposed route violates the county ordinance. Exhibits A46j and A46k.
4. McPherson County
   1. Mr. Erik Schovanec states that SCS’s proposed route does not comply with the setback distances in McPherson County. Exhibit A46, pg. 8, lines 13-15. McPherson County’s ordinance is lengthy and detailed. However, Staff notes that there is a process in place at McPherson County to file for a variance from the strict compliance with the ordinances. Without evidence from Summit demonstrating that they received variances from McPherson County, the proposed route violates the county ordinance. Exhibits 46l and 46m.

Therefore, based on the Applicant’s own admissions, the current route, without waivers from landowners or county permits, would violate local ordinances. Staff is not aware of any Summit exhibits that provide evidence that Summit has obtained the necessary waivers and/or county permits that allow the proposed route to violate setback distances in ordinance.…

…SDCL 49-41B-22(1) provides that Applicant must prove that the proposed facility will comply with all applicable laws and rules. Summit cannot satisfy this burden at this time.

…Because Applicant has a route that does not comply with the ordinances, and Summit cannot provide evidence that the route complies with those ordinances subject to waivers or county permits on the timeline in this docket, Summit has removed what was logically its only path forward in this docket by withdrawing its preemption request. Thus, the Application should be denied pursuant to SDCL 49-41B-13(1) [Kristen Edwards, SDPUC staff attorney, Motion to Deny Application, PUC Docket HP22-001: In the Matter of the Application by SCS Carbon Transport LLC for a Permit to Construct a Carbon Dioxide Transmission Pipeline, 2023.09.08, pp. 1–2, 3, 4].

Summit’s lawyers say they dig where the PUC staff is coming from but believe the future tense can spare them such a “drastic outcome” as denying them a full hearing:

SDCL § 49-41 B-22(1) provides that to obtain a permit, an applicant must show that the “proposed facility will comply with all applicable laws and rules.” (emphasis added) As the South Dakota Supreme Court recently explained, that dictate is “forward looking,” such that the applicant does not have to have each county permit in hand or necessarily be compliance with local ordinances at the time of the hearing. Christenson v Crowned Ridge Wind, LLC, 2022 S.D. 46, ¶30, 978 N.W.2d 741, 751. Instead, this Commission can “apply the forward-looking standard of SDCL 49-41B-22(1)” to “attach[] a condition to the permit requiring” that, before construction, the applicant be in compliance with all laws. Id., ¶33.

That is all SCS is asking for. Because so much effort and so many resources have been expended in preparing the application and for this hearing, SCS asks that the hearing continue that it be given the opportunity to prove the requirements of SDCL § 49-41B-22 and obtain a permit with the condition that it come into compliance with all applicable local ordinances before construction. If this Commission were to rule otherwise—if it were to hold that an applicant must have each county-level permit in hand before a hearing—then this and future projects may be unnecessarily delayed or terminated [Brett Koenecke and Cody L. Honeywell, Response to Staff Motion to Deny Application, PUC Docket HP22-001, 2023.09.08, p. 2].

Verb games are fun, but they have to be tied to nouns, and the primary noun here is the “proposed facility” that “will comply” with those four county ordinances. The proposed facility runs through places where four counties say it cannot. Summit just ceded its argument that the state could tell counties they can’t say that, so they need to propose a new facility that runs in new places.

Adding inflation to injury, PUC staff also moved yesterday to charge Summit Carbon Solutions possible another hundred grand for its apparently doomed application. On February 29, 2022, the PUC determined the maximum filing fee Summit would have to pay for its application would be $592,500, based on Summit’s estimate that the South Dakota branches of its project would cost $785 million. In a another motion filed Friday, PUC staff report that Summit has increased its South Dakota cost estimate 29.8%, to $1.019 billion, thus justifying an increase of the maximum filing fee to $709,625. PUC staff says in its motion that Summit does not object to the higher fee. (Hmm… could Summit be quietly acknowledging that the real thing that will kill their pipeline is not objections from counties or landowners or the PUC but their inability to keep up with construction costs?)

Summit had to reapply in North Dakota, where it plans to sequester the carbon dioxide from ethanol plants around the upper Midwest. But all that CO2 from Minnesota, Iowa, and Nebraska has to run through South Dakota. And the PUC lawyers are telling their commissioners they cannot legally approve Summit’s current proposed route through counties that object to the plan.