Wild Wild Midwest: New Battleground for CO2 Pipelines
Complex regulatory landscape coupled with the power of civil society at the state level virtually negate all the benefits of the federal CCUS policies.
North Dakota boasts primary authority over Class VI permitting, yet it does not help when it comes to delivering carbon dioxide to a storage site. Federal tax incentives coupled with streamlined CO2 storage approvals bolster the attractiveness of the United States as a CCUS investment destination. However, regulatory and legal hurdles increase risks for CO2 pipeline projects across the region dimming the prospects for the decarbonization of ethanol manufacturing.
Between August and November, Navigator CO2 Ventures cancelled its Heartland Greenway Pipeline (spanning Iowa, Minnesota, Nebraska, South Dakota, and Illinois), Summit Carbon Solutions was denied key permits for the Midwest Carbon Express CO2 pipeline (Iowa, Minnesota, Nebraska, South Dakota, and North Dakota) and Wolf Carbon Solutions withdrew its regulatory application (Iowa to Illinois pipeline) in Illinois and will resubmit the documents in 2024. The mix of challenges is impressive, and their scale is growing by the day.
Who Isn’t Onboard?
Proposed carbon dioxide pipelines affect the interests of several groups that do not necessarily want to block such projects altogether, but would like to see more stringent regulations and controls that would address their concerns.
Environmental groups. They are generally opposed to CCUS projects and are frequently joined by local residents who question the safety of carbon dioxide pipelines. Such citizens may be concerned about the proximity of a CO2 pipeline to a school, hospital, residential area or a public space.
Landowners. This group is seeking to protect property rights and it is critical of the use of eminent domain powers by project operators and the impact of construction activities on their land. They insist on proper compensation for the use of their land and safety guarantees.
Developers. They are concerned about the negative impact of a CO2 pipeline on the development of specific urban areas, for example recreational zones. This group is seeking to extend the distance between proposed pipelines and cities/towns.
These diverse groups have several ways to pursue their goals, including consultations, petitions, legal challenges, and public campaigns that significantly add to the work of regulatory bodies.
Regulations? It’s Complicated
Extended public hearings and the lack of regulatory deadlines create uncertainties around project approvals. For example, it took the Iowa Utilities Board 8 weeks to complete the public hearing on Summit’s proposed pipeline, which was the longest in history. The Board’s decision is pending, but the regulator is not obligated to deliver it by a specific date, and it can take three to four months to process all the evidence. Meanwhile, the Public Utilities Board of South Dakota agreed to reconsider the decision to deny Summit’s application for a permit, although there is no statutory provision for such a procedure, and it remains unclear how and when it will be conducted.
Moreover, county authorities are seeking to impose local controls on CO2 pipelines, creating more confusion and increasing the regulatory burden for project developers. Typically, they would issue ordinances that establish minimum setbacks to increase the distance between carbon dioxide pipelines and buildings. According to the emergency management guidebook from the federal Pipeline and Hazardous Materials Safety Administration (PHMSA), the minimum setback is 330 feet, yet counties in the Midwest seek to push the distance to 1,500 feet.
Currently, at least five counties in South Dakota and two counties in North Dakota have established minimum setbacks which exceed the federally recommended distance. The requirements affect Summit’s proposed project and will likely require the company to reroute the CO2 pipeline. The ordinances do not seem to be restrictive to the point of making the project unviable and Summit has different options to comply (see the picture below). However, each step is associated with significant uncertainty and the process can stumble at any point. It is therefore critical for the PHMSA to update federal setback requirements that factor in local concerns and eliminate the need for counties to establish their own regulations that complicate compliance.
Another option for companies to avoid county interventions is to challenge in court their powers to issue setback ordinances (which are disputable). Still, project operators will likely have to file separate lawsuits in each state along the pipeline route. Earlier this year, a federal judge in Iowa upheld Summit’s request for a temporary injunction to prevent the enforcement of an ordinance that, according to the ruling, violated federal and state regulations.
We call upon the court to explain!
What constitutes “public use”? Specifically, what constitutes “public use” in case of a carbon dioxide pipeline? This question is highly relevant to the ongoing debates in the Midwest when it comes to eminent domain, or the power of the government to take private property and convert it into public use (with just compensation to the owner). The term “public use” is subject to broad interpretation and can sometimes include public benefit or general welfare. Among the examples of public use are public schools, public utilities, parks, and transit operations.
Does the transportation of carbon dioxide to a permanent storage site fall under the definition of public use? Well, it is part of climate action and contributes to the federal government’s goal of reaching net zero emissions. Hypothetically, it could be interpreted as public benefit and thus included in the definition of public use. However, these are unchartered waters and only courts will be able to clarify the issue. Given the geographical scope of the CCUS industry, a Supreme Court ruling will likely be required to introduce a nationwide practice.
Where there is a permit, there is hope...
… to quash this permit in court. Who would need a pipeline when there is nothing to transport? CO2 capture facilities could be the next target of legal action. Several local residents in Iowa supported by Sierra Club are concerned about water withdrawals for one of the capture plants, where water would be used as a coolant in the CO2 capture process. They allege that it will have adverse effects on drinking water sources and does not fall under the definition of “beneficial use” in the state law. In May, Iowa’s Department of Natural Resources issued a water withdrawal permit, which the local residents are seeking to contest. In addition, Sierra Club questions an air quality permit arguing that the capture facility would release triethylene glycol in the atmosphere, which has negative health impacts. The outcome of the case remains uncertain, but it highlights various instruments that the opponents of carbon dioxide pipelines can use to block or delay construction.
It’s getting political
With elections and legislative season approaching, new pressure groups are forming to advance measures to protect property rights of landowners across the Midwest. In South Dakota, Dakota Rural Action, Landowners for Eminent Domain Reform, and the South Dakota Farmers Union have founded the South Dakotans First campaign to promote bills during the 2024 legislative session that would limit the power of eminent domain. Separately, a group of lobbyists and agricultural businessmen created the South Dakota Ag Alliance at the end of November. Unlike the previous group, the Alliance is seeking to negotiate with all the concerned parties in the eminent domain debates and come up with a solution that would satisfy landowners and allow the construction of carbon dioxide pipelines.
Although at the federal level the CCUS industry enjoys bipartisan support, at the state level the situation is more nuanced and could spark a national discussion about CO2 pipelines. In South Dakota, the Republicans in the state legislature are divided on the issue of eminent domain, with some members calling for a more restrictive approach when it comes to carbon dioxide transportation. Across Iowa, South Dakota and North Dakota, politicians are urging voters to support elected officials who would protect property rights. Moreover, in Iowa, presidential candidate from the Republican Party Vivek Ramaswamy has repeatedly voiced his opposition to the use of eminent domain for CO2 pipelines and has sided with the activist groups that attempt to block such developments in Iowa. Ramaswamy has also called on the governor of Iowa and other Republican candidates to take a stand on eminent domain and carbon dioxide pipelines in general. The 2024 presidential campaign is a chance for the opponents of CO2 pipelines to turn their concerns into a high-profile political matter, with potentially significant ramifications for the entire CCUS industry.