STROM TRUST v. SCS CARBON TRANSPORT, LLC

#30317, #30338-r-JMK
2024 S.D. 48IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA
****
#30317
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,
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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.
****
APPEAL FROM THE CIRCUIT COURT OF
THE THIRD JUDICIAL CIRCUIT
BEADLE COUNTY AND
LAKE COUNTY, SOUTH DAKOTA
****
THE HONORABLE PATRICK T. PARDY
Judge
****
ARGUED
MARCH 19, 2024
OPINION FILED 08/21/24
****
#30338
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,
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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
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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.
****
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.
#30317, #30338
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.
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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.
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[¶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
1. Some of the contracts involve lengthy offtake agreements, whereby SCS
agrees to transport a certain amount of CO2 away from the third-party
ethanol facilities. However, significant terms—including pricing
information—are redacted from the agreements in the record. While SCS
offered to provide the original documents for our review, after the issue came
up in oral argument, we ultimately declined the offer, deciding to resolve the
case on the record before us.
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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, non-
destructive 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 use of a backhoe to dig trenches typically 7 to 10 feet in length, 2 to 3
feet in width, and 6 to 10 feet deep.” SCS committed that “[o]nce this deep testing
survey work is completed, any trenches will be backfilled and the ground will be
graded to near existing conditions.” For all three survey types, SCS assured
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landowners that resulting property damage would be repaired or reimbursed. To
this end, SCS obtained a $1 million performance bond, which was later increased to
$5 million. 2
[¶10.] Landowners refused to consent to the surveys and sued SCS in both
the Third and Fifth Circuits. Two cases—Strom and Deeg—were brought in the
Third Circuit, seeking declaratory and injunctive relief to prohibit SCS from
conducting the surveys. The plaintiff Landowners in these cases alleged that SDCL
21-35-31 was unconstitutional under the takings and due process clauses of the
federal and state constitutions. SCS counterclaimed, seeking declaratory judgment
and injunctive relief recognizing its statutory right to conduct the surveys and
prohibiting Landowners from interfering. The Strom and Deeg cases were
consolidated, and Landowners submitted an amended complaint with six grounds
for relief, arguing, among other things, that SDCL 21-35-31 violated the federal and
state constitutions and that SCS was not a common carrier authorized to exercise
the power of eminent domain.
[¶11.] During discovery, Landowners moved to compel production of any
offtake agreements between SCS and third-party entities for the transportation of
CO2. Landowners argued that these agreements were “critically important to the
question of whether SCS is a common carrier” and thus entitled to exercise eminent
domain power under SDCL 21-35-31. In response, SCS sought a protective order on
2. It is unclear whether this sum is intended to cover damages exclusively in
South Dakota or in all of the states potentially affected by the pipeline.
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the basis that the agreements contained “extraordinarily confidential” terms and
pricing information that if publicized would put SCS at a competitive disadvantage.
[¶12.] The Third Circuit conducted an in-camera review of the agreements
and granted SCS a protective order. 3 In granting the protection order, the circuit
court entered a memorandum decision on December 28, 2022, finding sua sponte
that CO2 was a commodity “regardless of the form of compensation, terms of
payment, or transfer of value.” In addition, the court concluded that the
agreements “establish that SCS is shipping carbon dioxide, belonging to the ethanol
plants, for a fee.” The court also noted that the agreements were not relevant to the
“primary” legal issue in the case, namely, the constitutionality of SDCL 21-35-31.
[¶13.] In January 2023, SCS moved for summary judgment on all claims and
counterclaims in the Third Circuit cases. Landowners resisted this motion and
moved to compel additional discovery and for a continuance of the motion for
summary judgment to conduct additional discovery under SDCL 15-6-56(f). After a
hearing, the Third Circuit denied the motion to compel and for a continuance and
granted SCS’s motion for summary judgment. Having sua sponte determined that
SCS was a common carrier in its prior discovery ruling, the circuit court held that
SDCL 21-35-31 was constitutional and that as a common carrier SCS was
authorized by SDCL 21-35-31 to conduct its proposed surveys.
[¶14.] Meanwhile, four cases—Helfenstein, Braun, Schumacher, and Bossly—
were brought in the Fifth Circuit and consolidated. These plaintiff Landowners also
3. The agreements reviewed by the circuit court were not sealed and placed into
the record for our review.
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sought declaratory and injunctive relief based on grounds almost identical to those
asserted by Landowners in their consolidated amended complaint filed in the Third
Circuit. However, in a fifth case—Jordre—SCS sued Landowners for declaratory
and injunctive relief for survey access. In Jordre, the defendant Landowners did
not amend their counterclaim to match that of the other four cases. But
Landowners filed a motion to compel, and SCS filed a motion for a protective order.
The Fifth Circuit denied Landowners’ motion to compel and granted SCS’s motion
for a protective order. SCS moved for summary judgment on all claims and
counterclaims in February 2023, while Landowners sought a continuance under
SDCL 15-6-56(f).
[¶15.] After a hearing, the Fifth Circuit denied the Rule 56(f) continuance
and granted SCS’s motion on all issues except for SCS’s common carrier status. The
court took this issue under advisement and ordered further briefing. After
consideration of the parties’ arguments the court ultimately concluded that SCS is a
common carrier and adopted the reasoning of the Third Circuit court on this issue.
Accordingly, the court granted summary judgment to SCS on all issues and
authorized SCS to conduct the proposed surveys. Landowners appealed both the
Third and Fifth Circuit rulings, and this Court granted Landowners’ motion to
consolidate the cases on appeal. 4 Landowners raise six issues, which we restate
and reorder as follows:
4. After oral argument in this case, SCS moved to submit late authorities
pursuant to SDCL 15-26A-73. Specifically, SCS requested that this Court
consider SCS Carbon Transportation v. Malloy, in which the North Dakota
(continued . . .)
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1. Whether the circuit courts erred by entering summary
judgment concluding SCS was a common carrier vested
with the power of eminent domain.
2. Whether the circuit courts erred by denying Landowners’
motion to continue summary judgment for discovery
purposes.
3. Whether the circuit courts erred by finding SDCL 21-35-
31 authorized subsurface exploratory activities.
4. Whether the circuit courts erred by finding SDCL 21-35-
31 is not a taking within the meaning of the Fifth
Amendment to the United States Constitution and the
South Dakota Constitution article VI, § 13.
5. Whether the circuit courts erred as a matter of law by
concluding SDCL 21-35-31 provided adequate procedural
due process.
6. Whether the circuit courts erred by finding SCS complied
with the requirements of SDCL 21-35-31.
Analysis
[¶16.] On March 11, 2024, SCS filed a motion to continue oral argument,
suggesting that this appeal was moot because the Legislature amended the
challenged provisions of SDCL 21-35-31, effective July 1, 2024. However, several
issues presented in this appeal—most prominently whether SCS is a common
carrier and whether carbon is a commodity—do not turn on the text of SDCL 21-35-
31 and are unaffected by any potential amendments to this statute.
[¶17.] Nor do we perceive mootness associated with the bare fact that SDCL
21-35-31 has been amended and went into effect on July 1. Prior to its enactment,
________________________
(. . . continued)
Supreme Court upheld the constitutionality of a statute similar to SDCL 21-
35-31. 7 N.W.3d 268 (N.D. 2024). We granted SCS’s motion.
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the previous version of the statute was used as authority by SCS to conduct pre-
condemnation surveys. In fact, both the Third and Fifth Circuits enforced the
earlier version of SDCL 21-35-31 by enjoining Landowners from preventing the pre-
condemnation surveys. Amended statute or not, a declaration of rights under the
earlier statute for pre-condemnation surveys remains very much a live controversy.
[¶18.] However, our analysis of SDCL 21-35-31 below should be understood
as doing nothing more than interpreting the statute before us, not the current one
that is in effect. Whether the recent amendments would impact the statute’s
constitutionality is a question for another day. We have not sought supplemental
briefing on the constitutionality of the new statute and do not decide that question
today.
[¶19.] Turning to the merits, we combine the first two issues because SCS
can only exercise eminent domain authority pursuant to SDCL 21-35-31 if it
qualifies as a common carrier and the circuit court’s ruling on the discovery issues
implicates that question.
I. Whether the circuit courts erred by denying
Landowners’ motions to continue and by entering
summary judgment concluding SCS was a common
carrier vested with the power of eminent domain.
[¶20.] SCS claims eminent domain authority pursuant to SDCL 49-7-13.
This statute grants eminent domain power to pipeline companies that meet the
definition of common carrier set forth in SDCL 49-7-11: “All pipelines holding
themselves out to the general public as engaged in the business of transporting
commodities for hire by pipeline are common carriers and are not subject to the
provisions of Title 49 except as provided by this chapter and chapter 49-41B.”
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(Emphasis added.) The Third Circuit determined, sua sponte, that SCS met this
definition of common carrier. Landowners argue that the court erred because SCS’s
proposed pipeline will not truly be “for hire” and because CO2 is not a commodity.
Accordingly, in Landowners’ view, SCS cannot properly claim eminent domain
authority. In the second issue statement above, Landowners also argue that the
Third and Fifth Circuits erred in denying their motions to continue summary
judgment for further discovery on the common carrier issues.
A. Summary judgment on the common carrier and
commodity issues.
[¶21.] “We review grants of summary judgment under the de novo standard
of review.” Bialota v. Lakota Lakes, LLC, 2024 S.D. 7, ¶ 15, 3 N.W.3d 454, 459
(citation omitted). “Summary judgment is only appropriate when the court
determines that the pleadings, depositions, answers to interrogatories, and
admissions on file, together with any affidavits of the parties, reveal that there are
no genuine issues of material fact and that the moving party is entitled to judgment
as a matter of law.” McGee v. Spencer Quarries, Inc., 2023 S.D. 66, ¶ 18, 1 N.W.3d
614, 620 (citation omitted). “It is well-settled that ‘[w]e view the evidence most
favorably to the nonmoving party and resolve reasonable doubts against the moving
party.’” Uhre Realty Corp. v. Tronnes, 2024 S.D. 10, ¶ 41, 3 N.W.3d 427, 438
(alteration in original) (citation omitted).
[¶22.] Landowners assert that the definition of common carrier in SDCL 49-
7-11 is not met because the record does not demonstrate whether future third
parties will actually be paying SCS to transport CO2. Landowners specifically
object to the Third Circuit’s determination that “the nature of the payment or
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transfer of value is not relevant or determinative of the fact that a fee exists.”
Landowners also point out that under the terms of the offtake agreements in the
record, SCS will take title to the CO2 as it enters the pipeline. According to
Landowners, SCS cannot be classified as transporting CO2 for hire if it is
transporting its own CO2. In addition, Landowners claim that because it is being
disposed of as waste, the CO2 featured in this case is not a commodity.
[¶23.] Landowners also suggest that this Court apply the test used by the
Texas Supreme Court to determine common carrier status:
[F]or a person intending to build a CO2 pipeline to qualify as a
common carrier under Section 111.002(6), a reasonable
probability must exist that the pipeline will at some point after
construction serve the public by transporting gas for one or more
customers who will either retain ownership of their gas or sell it
to parties other than the carrier.
Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 363 S.W.3d
192, 202 (Tex. 2012). Section 111.002(6) provides that an entity is a common carrier
if it “owns, operates, or manages, wholly or partially, pipelines for the
transportation of carbon dioxide or hydrogen in whatever form to or for the public
for hire.” Tex. Nat. Res. Code § 111.002(6). This statute is largely equivalent to
SDCL 49-7-11, and we conclude that our statute—particularly the “for hire”
component—should be interpreted similarly.
[¶24.] As this Court has previously stated, “[t]he power to take privately
owned property and put it to public use is ‘an inherent right vested in a sovereign
state as a necessary attribute thereof.’” Montana-Dakota Utils. Co. v. Parkshill
Farms, LLC, 2017 S.D. 88, ¶ 7, 905 N.W.2d 334, 337 (quoting Darnall v. State, 79
S.D. 59, 63, 108 N.W.2d 201, 203 (1961)). The Legislature can delegate the power of
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eminent domain to non-public corporations, such as utilities or pipelines, but the
essential requirement of public use remains. Without it, a private enterprise could
exercise the austere power of the State purely for its own private interests in
contravention of federal and state constitutional takings clauses. See Hawaii Hous.
Auth. v. Midkiff, 467 U.S. 229, 245, 104 S. Ct. 2321, 2331, 81 L. Ed. 2d 186 (1984)
(“A purely private taking could not withstand the scrutiny of the public use
requirement; it would serve no legitimate purpose of government and would thus be
void.”)
[¶25.] Consequently, the Legislature’s decision to delegate the power of
eminent domain to pipeline companies in SDCL 49-7-13 must be understood to
require a public use that actually serves the public. The statute accounts for this by
allowing pipeline companies to exercise the power of eminent domain if they are
common carriers, which SDCL 49-7-11 defines as “[a]ll pipelines holding themselves
out to the general public as engaged in the business of transporting commodities for
hire by pipeline[.]”
[¶26.] But a pipeline cannot become a common carrier simply by declaring
itself to be one. See Denbury Green Pipeline-Tex., LLC v. Tex. Rice Land Partners,
Ltd., 510 S.W.3d 909, 916 (Tex. 2017). Rather, as the Texas Supreme Court
explained, to be a common carrier, the pipeline must serve the public, meaning “a
reasonable probability must exist that the pipeline will at some point after
construction serve the public by transporting gas for one or more customers who
will either retain ownership of their gas or sell it to parties other than the carrier.”
Texas Rice Land Partners, 363 S.W.3d at 202.
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[¶27.] According to Landowners, SCS cannot meet this test because there is
no evidence that SCS is being paid to transport CO2. Landowners persuasively
suggest that SCS’s business model is akin to that of a private carrier, where SCS
ships its own CO2 through its own transportation network to an underground
storage facility. 5 Indeed, the redacted pricing terms are crucial to the summary
judgment analysis regarding whether the CO2 is being shipped to or for the general
public. The record is not adequately developed concerning the details of the
transactions and prices between SCS and the ethanol plants to affirm as a matter of
law that SCS is “holding [itself] out to the general public as engaged in the business
of transporting commodities for hire[.]” See SDCL 49-7-11.
[¶28.] SCS responds with four factual claims intended to establish its identity
as a common carrier as a matter of law. First, SCS advertised its transportation
services for hire to the general public and reached out directly to potential
customers. Second, SCS expressed an intent to hold an open season where the
general public can execute binding commitments for SCS’s services. Third, SCS is
reserving a portion of its pipeline capacity for future shippers. Fourth, SCS
represented to the State of North Dakota that it will carry on business as a common
carrier.
[¶29.] SCS is correct that “the concept of ‘common carrier’ must be flexible
enough to accommodate reasonable commercial practice.” N.Y. Susquehanna & W.
Ry. Corp. v. Jackson, 500 F.3d 238, 251 (3d Cir. 2007). However, none of the facts
5. Landowners note that SCS can then obtain a federal tax credit of $85 for each
metric ton of CO2 sequestered.
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alleged above, even if true, would provide undisputed evidence of a “reasonable
probability . . . that the pipeline will at some point after construction serve the
public by transporting gas for one or more customers who will either retain
ownership of their gas or sell it to parties other than the carrier.” See Texas Rice
Land Partners, 363 S.W.3d at 202. Here, there remain factual disputes regarding
whether ethanol plants contracting with SCS will retain ownership of their CO2 or
sell it to parties other than SCS. Indeed, the unredacted offtake agreements may
very well reveal that SCS is ultimately purchasing and taking ownership of the
CO2. In addition, it is undisputed that instead of being sold to parties other than
the carrier, the CO2 will be sequestered underground in North Dakota.
[¶30.] Based on the record before us, SCS has also failed to establish that the
CO2 featured in this case is a commodity. SCS notes that the federal government
and several states, including Louisiana, Oklahoma, Mississippi, North Dakota, and
Nebraska, classify CO2 as a commodity. See 49 C.F.R. § 1039.11(a) (CO2 is listed as
a commodity by the Surface Transportation Board); La. Rev. Stat. § 30:1102(A)(2);
Okla. Stat. tit. 27A, § 3-5-101(B)(1); Miss. Code Ann. § 53-11-3(1)(b); N.D. Cent.
Code § 38-22-01; Neb. Rev. Stat. § 57-1602. SCS also suggests that CO2-based
products, from fertilizers to building blocks, could be worth up to $1 trillion by 2030.
According to SCS, even CO2 that is ultimately stored underground has value
because of the carbon-offset markets and federal subsidies which are available to
shippers and third-party facilities.
[¶31.] However, it is not at all apparent that CO2, as featured in this case,
meets the definition of a commodity: “[a]n article of trade or commerce” or “[a]n
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economic good, esp. a raw material or an agricultural product.” Commodity, Black’s
Law Dictionary (11th ed. 2019). Although CO2 is used as a raw material in the
manufacturing of numerous products, 6 Landowners correctly point out that the CO2
at issue here is being transported for storage underground, with no other apparent
use. As SCS’s counsel acknowledged before this Court at oral argument, the
classification of CO2 as a commodity when it is being transported and sequestered
underground is a novel question of first impression. Here, the record is simply
devoid of any indication that CO2 is being used in this context as an “article of trade
or commerce” or being sold as an “economic good.” Instead, it appears from our
review of the record that 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.
[¶32.] In states where CO2 is classified as a commodity, the legislatures have
made a policy decision that CO2 is a commodity due to its potential industrial
applications, including the recovery of oil, gas, and other minerals. See La. Rev.
Stat. § 30:1102(A)(2); Okla. Stat. tit. 27A, § 3-5-101(B)(1); Miss. Code Ann. § 53-11-
3(1)(b); N.D. Cent. Code § 38-22-01; Neb. Rev. Stat. § 57-1602. The Legislature of
South Dakota, however, has been silent on this particular subject. On the basis of
an undeveloped record regarding pricing terms and business structure, we are
unwilling to make such a significant determination, particularly one that is heavily
bound up in policy considerations. On the limited factual record before us, SCS has
6. Potential items that could be fabricated with CO2 include proteins, polymers,
foams, plastics, concrete, furniture, shatterproof glass, and fuel.
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not demonstrated, as a matter of law in these summary judgment proceedings, a
reasonable probability that the CO2 being transported and sequestered in the case
will be put to any productive use.
[¶33.] Because the record, viewed most favorably to the Landowners, does not
demonstrate that SCS is transporting a commodity for hire to or for the general
public, the circuit courts erred in concluding that SCS is a common carrier pipeline
authorized to exercise eminent domain authority. We reverse the grant of summary
judgment and remand for further proceedings.
B. Landowners’ Motion for Further Discovery.
[¶34.] Having reversed the circuit courts’ orders for summary judgment
determining that SCS qualified as a common carrier, it is necessary to address the
issue of Landowners’ motion for further discovery. On December 28, 2022, the
Third Circuit issued a memorandum decision granting SCS’s motion for a protective
order regarding certain information in the offtake agreements. In its analysis, the
circuit court found sua sponte that SCS qualified as a common carrier and that CO2
was a commodity. These findings were later adopted by the Fifth Circuit in its
opinion granting summary judgment to SCS. Landowners argue that the Third
Circuit’s sua sponte ruling was improper and that they should have been permitted
further discovery.
[¶35.] First, we must consider SCS’s argument that the sua sponte common
carrier determination is not properly before the Court. According to SCS, the notice
of appeal only included the Third Circuit’s March 8, 2023 memorandum opinion
granting summary judgment to SCS and not its earlier December 28, 2022 order, in
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which the circuit court found that SCS was a common carrier. As a result,
according to SCS, the sua sponte issue is not properly before this Court. However,
in the March 8 opinion, the circuit court specifically referenced its reasoning in the
December 28 order and, on this basis, disposed of the common carrier issues. We
conclude that this matter is properly before us. 7
[¶36.] Regarding discovery, Landowners sought to conduct Rule 30(b)(6)
depositions of SCS corporate designees and CEOs of SCS’s affiliated ethanol plants.
Since the inception of this litigation, Landowners have served SCS with five
subpoenas and notices of depositions, beginning on September 22, 2022. See SDCL
15-6-30(b)(6). However, according to Landowners, SCS “failed to attend any of
Landowners’ noticed depositions, designate appropriate agents, [or] cooperate with
Landowners to resolve” discovery disputes.
[¶37.] On February 14, 2023, Landowners moved to compel discovery.
Specifically, Landowners asked the Third Circuit to “enter[] an order compelling
SCS to designate appropriate agents with knowledge regarding Landowner’s
noticed deposition topics . . . , directing SCS to make persons available for
deposition on February 24, 2023 at 9:30 a.m. until fully answered, and an order
compelling SCS to dutifully cooperate with South Dakota’s discovery rules.”
Landowners argued to the court that these depositions would yield information
relevant to SCS’s common carrier status, compliance with SDCL 21-35-31, and
7. “On appeal from a judgment the Supreme Court may review any order,
ruling, or determination of the trial court, including an order denying a new
trial, and whether any such order, ruling, or determination is made before or
after judgment involving the merits and necessarily affecting the judgment
and appearing upon the record.” SDCL 15-26A-7.
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SCS’s ability to compensate Landowners for any actual damage. Landowners
proposed the following deposition topics:
1. The general background and ownership of SCS Carbon
Transport, LLC, and nature and type of business services
you offer and desire to provide within South Dakota and
your overall business plan.
2. The final version of any prospectus, private placement
memorandum, proformas or similar that in any way
describes your business model or business plan.
3. The contents and meaning of any executed agreement,
contract, or letter of intent of any kind [ ] between you or
any of your related entities and/or and carbon dioxide
emitter, including but not limited to “offtake agreement”,
located in the State of South Dakota who produces any
carbon dioxide that you intend to transport via pipeline
within South Dakota.
4. The ownership of the carbon dioxide you intend to
transport through your proposed pipeline within South
Dakota at each stage from initial emissions to final
placement or use and how the carbon dioxide you propose
to transport within South Dakota is to be used or
permanently sequestered and by whom.
5. The kind nature and type of examinations, surveys, and
maps thereof you believe you are allowed to conduct upon,
in, or under any of the land at issue in these consolidated
proceedings and whether or not the land of each and
every landowner in these consolidated cases that you seek
to survey, examine, and/or map is required by you for
public use and if so, how so and why.
6. Your procedures and criteria for determining damages to
all landowners in these consolidated cases should injury
to their property be caused by you or your agents in their
attempt or pursuit of examining, surveying, or mapping
such properties.
7. Your “new” Survey Permit Performance Bond.
8. The facts supporting your claims that you are a “common
carrier” in South Dakota and the facts supporting your
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claims that your proposed hazardous pipeline is for public
use within South Dakota.
9. Your paragraphs 1 through 12 of your Counterclaim and
the facts you rely upon to make said claims.
10. Your summary judgment evidence.
[¶38.] In a separate brief resisting summary judgment, also dated February
14, 2023, Landowners renewed their previous requests for “full unredacted versions
of all documents produced to date.” According to Landowners, the redacted portions
“are believed to contain material information.” However, on March 15, 2023, the
Third Circuit granted SCS’s motion for summary judgment and denied Landowners’
request for further discovery. Shortly thereafter, the Fifth Circuit granted SCS’s
motion for summary judgment and denied a similar motion to continue from
Landowners.
[¶39.] “Sua sponte orders of summary judgment will be upheld only when the
party against whom judgment will be entered was given sufficient notice and an
adequate opportunity to demonstrate why summary judgment should not be
granted.” Brown v. Hanson, 2007 S.D. 134, ¶ 19, 743 N.W.2d 677, 682. “SDCL 15-
6-56(f) authorizes a court to order a continuance to permit a party opposing
summary judgment to conduct discovery when necessary to oppose the motion.”
Gores v. Miller, 2016 S.D. 9, ¶ 14, 875 N.W.2d 34, 39. “A circuit court’s decision to
grant or deny a continuance under Rule 56(f) is reviewed for an abuse of discretion.”
Davies v. GPHC, LLC, 2022 S.D. 55, ¶ 51, 980 N.W.2d 251, 265.
[¶40.] “Under [Rule 56(f)], the facts sought through discovery must be
‘essential’ to opposing the summary judgment[.]” Stern Oil Co. v. Border States
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Paving, Inc., 2014 S.D. 28, ¶ 26, 848 N.W.2d 273, 281 (alterations in original)
(citation omitted). “This requires a showing how further discovery will defeat the
motion for summary judgment.” Id. (citation omitted). “To make this showing, the
Rule 56(f) affidavit must include identification of ‘the probable facts not available
and what steps have been taken to obtain’ those facts, ‘how additional time will
enable [the nonmovant] to rebut the movant’s allegations of no genuine issues of
material fact[,]’ and ‘why facts precluding summary judgment cannot be presented’
at the time of the affidavit.” Id. ¶ 26, 848 N.W.2d at 282 (alterations in original)
(quoting Anderson v. Keller, 2007 S.D. 89, ¶ 32, 739 N.W.2d 35, 43 (Zinter, J.,
concurring)).
[¶41.] In their Rule 56(f) affidavit, Landowners’ attorney explained how the
proposed deposition topics would uncover facts necessary to oppose summary
judgment:
• Deposition Topics #1, 2, 3, 4 and 8 would uncover specific
facts about SCS’s pricing scheme, whether their service or
operation is available for the public to freely use or is
exclusively meant to serve private entities, how their
operation conducts business with the public, how carbon is
being used, for what purpose it is being transported, who is
benefiting from the use of SCS’s service or operation, and
who owns the carbon dioxide at every stage of its use. I
believe these facts would refute SCS’s Motion for Summary
Judgment on the claims of whether SCS qualifies as a
common carrier and whether carbon dioxide qualifies as a
commodity.
• Deposition Topics #5, 6, and 7 would uncover specific facts
about SCS’s intentions with land owned by Landowners,
what extent SCS’s surveys and related activities will damage
the Landowners’ property, why these activities are needed,
why SCS wants to conduct these activities when they are not
required for permitting, why SCS does not want to comply
with SDCL Chapter 21-35 in their pursuit to condemn
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Landowners’ lands, whether there is a means reasonably and
rationally calculated to determining the appropriate
compensation for SCS’s damage to Landowner’s property,
whether SCS’s survey bond is sufficient to compensate all of
the Landowners who experience damage to their land,
whether this process is fair, how Landowners can appeal
SCS’s assessed damage value, and when Landowners can
expect compensation for their [assessed] damage to their
land. I believe these facts would refute SCS’s Motion for
Summary Judgment on the claims of whether SCS has
performed a taking and if SCS’s compensation scheme
appropriately aligns with due process requirements, whether
their survey actions exceed that which is statutorily
authorized, whether SCS is violating Landowners’
constitutional rights, and whether SCS qualifies as a
common carrier.
• Deposition Topics #9 and 10 would uncover specific facts
about whether SCS has meritorious arguments and evidence
supporting their counter claims and their Motion for
Summary Judgment. . . .
[¶42.] These assertions are sufficient for purposes of a continuance to engage
in discovery under Rule 56(f), especially in light of SCS’s significant resistance to
Landowners’ discovery and deposition requests. Ultimately, discovery regarding
SCS’s payments and other arrangements with third-party facilities to transport CO2
is crucial to determine whether SCS is shipping a commodity for hire to or for the
general public. In addition, much of the information sought through the
depositions—and certainly the redacted pricing terms from the offtake
agreements—is within the exclusive control of SCS. This weighs strongly in favor of
granting Landowners’ further discovery, contrary to the determinations by the
circuit courts that the information sought by Landowners has no bearing on any of
the issues in the case. Thus, we conclude that the circuit courts abused their
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discretion in denying Landowners’ motion to continue and by precluding
Landowners from conducting further discovery.
II. The Scope and Constitutionality of SDCL 21-35-31.
[¶43.] Our decision to reverse entry of summary judgment on the common
carrier issues resolves a threshold issue in this appeal, but we conclude that it is
appropriate to address the questions concerning the scope and constitutionality of
SDCL 21-35-31 to provide clarity and avoid protracted litigation on remand if SCS
is determined to be a common carrier. The parties have fully briefed and argued
these purely legal questions involving SDCL 21-35-31, and on remand, the parties
will undoubtedly continue to contest the takings issues, which are squarely before
us. Thus, we conclude a resolution of these issues will promote judicial efficiency,
irrespective of the ultimate resolution of the common carrier issues on remand. See
Dakota, Minnesota & Eastern R.R. Corp. v. Acuity, 2009 S.D. 69, ¶ 33, 771 N.W.2d
623, 633 (considering whether certain conduct during litigation could be introduced
as further evidence of bad faith because “the issue [was] likely to arise on remand”);
Stern Oil Co. v. Brown, 2018 S.D. 15, ¶ 42, 908 N.W.2d 144, 157 (addressing
whether Stern Oil was not a prevailing party entitled to attorney fees—an
“arguably moot” issue—“to provide the circuit court and parties with guidance” if
the issue arises again on remand).
[¶44.] To be clear, we make no judgment as to SCS’s ultimate common carrier
status, and only address the following issues to provide clarity on remand.
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A. Whether the circuit courts erred by finding SDCL
21-35-31 authorized subsurface exploratory
activities.
[¶45.] “We review issues of statutory interpretation de novo.” State v. Long
Soldier, 2023 S.D. 37, ¶ 11, 994 N.W.2d 212, 217. “The rules of statutory
interpretation are well settled.” Id. (citation omitted). “The purpose of statutory
interpretation is to discover legislative intent.” Id. (citation omitted). “[T]he
starting point when interpreting a statute must always be the language itself.” Id.(alteration in original) (citation omitted). “When the language in a statute is clear,
certain, and unambiguous, there is no reason for construction, and the Court’s only
function is to declare the meaning of the statute as clearly expressed.” Id. (citation
omitted). “In conducting statutory interpretation, we give words their plain
meaning and effect, and read statutes as a whole.” Id. (citation omitted).
[¶46.] SDCL 21-35-31, prior to July 1, 2024, provided:
The provisions of this section only apply to a project which
requires a siting permit pursuant to chapter 49-41B. Each
person vested with authority to take private property for public
use may cause an examination and survey to be made as
necessary for its proposed facilities. The person or person’s
agents and officers may enter the private property for the
purpose of the examination and survey. Any person seeking to
cause an examination or survey, where permission for
examination or survey has been denied, shall:
1) Have filed a siting permit application with the Public
Utilities Commission pursuant to § 49-41B-11;
2) Give thirty days written notice, including the filing and
expected dates of entry, to the owner and any tenant in
possession of the private property; and
3) Make a payment to the owner, or provide sufficient
security for the payment, for any actual damage done to
the property by the entry.
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This section does not apply to the state or its political divisions.
This section is in addition to and not in derogation of other
existing law.[ 8]
[¶47.] Landowners assert that SCS’s proposed survey activities, including the
use of hand tools, mounted drilling rigs, and backhoes, go beyond this statutory
authorization. SCS responds that the “ordinary meaning” of “examination” and
“survey” includes both “visual” and “physical” examination. SCS points to a recent
decision of the North Dakota Supreme Court, which held that “[t]he definition of
‘examination’ is not strictly limited to a visual examination.” In re 2015 Application
for Permit to Enter Land, 883 N.W.2d 844, 849 (N.D. 2016) (relying on the definition
of “examination” from the Webster’s New World Dictionary (2d coll. ed. 1980)).
[¶48.] However, any such interpretative proposition must be weighed against
the fundamental principle—espoused by the vast majority of states—that eminent
domain statutes are strictly construed in favor of the property owner. See Clarke
Cnty. Reservoir Comm’n v. Robins, 862 N.W.2d 166, 171 (Iowa 2015) (“Statutes that
delegate the power of eminent domain should be strictly construed and restricted to
their expression and intention.”); see also Dana Berliner, Am. Law Inst. Continuing
Legal Ed., Strict Construction in Eminent Domain Statutes, SZ005 ALI-CLE 287
8. The textual authority for pre-condemnation surveys remains the same in
both the current and previous versions of SDCL 21-35-31—“Each person
vested with authority to take private property for public use may cause an
examination and survey to be made as necessary for its proposed facilities.”
The current version, however, also includes a definition or description of the
terms “examination” and “survey.” But, as indicated above, we are
interpreting the previous version of SDCL 21-35-31 because it was used to
authorize the pre-condemnation surveys undertaken to date. The effect, if
any, of the Legislature’s new text concerning “examination” and “survey” is
not before us here.
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(Jan. 2018) (excerpting state jurisprudence concerning the interpretation of eminent
domain statutes). As this Court previously stated, “[p]roceedings to take private
property by condemnation are special in character and must be conducted in strict
accordance with governing statutes.” Ehlers v. Jones, 81 S.D. 351, 353, 135 N.W.2d
22, 23 (1965).
[¶49.] Now, “[c]ourts have typically defined a survey as the measurement of
land.” 9 Nichols on Eminent Domain § G32.06. For example, in Missouri Highway
and Transportation Commission v. Eilers, the Missouri Court of Appeals explained
that “[a] survey is ‘an actual examination of the surface of the ground[,]’” and
“‘merely evidence of location and boundary.’” 729 S.W.2d 471, 473 (Mo. Ct. App.
1987) (citation omitted). Thus, a “soil survey”—involving the use of a three-inch
auger to remove soil for testing—would go beyond the strict meaning of “survey.”
Id. at 472. Similarly, in Mackie v. Town of Elkton, a Maryland court defined survey
entries as those that “are innocuous and temporary effecting only minimal
incidental damage and little, if any, disturbance.” 290 A.2d 500, 505 (Md. 1972). As
a result, the court held that the use of a backhoe to conduct geological investigations
did not fall within this definition. Id. See also Nat’l Compressed Steel Corp. v.
Unified Gov’t of Wyandotte Cnty., 38 P.3d 723, 735 (Kan. 2002) (holding that
“subsoil testing is beyond the scope of the examination authorized” by a Kansas pre-
condemnation survey provision); Indiana State Highway Comm’n v. Ziliak, 428
N.E.2d 275, 279 (Ind. Ct. App. 1981) (concluding that the “right to enter private
property for the purpose of examination and survey confers no license to engage in
the process of conducting archaeological digs”).
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[¶50.] Nevertheless, SCS proposes that “survey” and “examination” should be
understood as “[t]he measuring of a tract of land and its boundaries and contents.”
Survey, Black’s Law Dictionary (11th ed. 2019) (emphasis added). But even this
definition is somewhat ambiguous as “contents” could very well refer to
aboveground, as opposed to subsurface, features of the property. In any event,
SCS’s reading of the statute would authorize any number of invasive activities
directly at odds with the owner’s right to possess their property. In light of the
near-universal consensus in favor of strict construction, we decline to adopt such a
broad interpretation of SDCL 21-35-31.
[¶51.] Furthermore, if fairly possible, we will adopt a construction of the
statute that avoids constitutional infirmities. Steinkruger v. Miller, 2000 S.D. 83,
¶ 8, 612 N.W.2d 591, 595. For the reasons previously expressed, SCS’s proposed
“geotech” and “deep dig” surveys would constitute takings under both the federal
and state constitutions, rendering SDCL 21-35-31, as interpreted by SCS,
unconstitutional because the scope of the survey or examination exceeds the
common law definition we would ascribe to it.
[¶52.] Instead, we conclude that “survey” and “examination,” in the context of
SDCL 21-35-31, “cannot amount to other than such innocuous entry and superficial
examination as would suffice for the making of surveys or maps and as would not in
the nature of things seriously impinge upon or impair the rights of the owner to the
use and enjoyment of his property[.]” Kane Cnty. v. Elmhurst Nat’l Bank, 443
N.E.2d 1149, 1154 (Ill. App. Ct. 1982). We will refer herein to such a minimally
invasive inspection as a “standard survey.” Accordingly, we hold that the “geotech”
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and “deep dig” activities, involving heavy equipment for invasive drilling and
digging, do not qualify as a “survey” or “examination.” We turn now to the question
whether SDCL 21-35-31, as interpreted herein, constitutes a taking under the
federal and state constitutions.
B. Whether the circuit courts erred by finding SDCL
21-35-31 is not a taking within the meaning of the
Fifth Amendment to the United States Constitution
and the South Dakota Constitution article VI, § 13.
[¶53.] “[T]his Court reviews de novo issues of constitutional interpretation.”
Dakota Constructors, Inc. v. Hanson Cnty. Bd. of Adjustment, 2023 S.D. 38, ¶ 12,
994 N.W.2d 222, 227. “When interpreting constitutional text, the goal is to discern
the most likely public understanding of a particular provision at the time it was
adopted.” McDonald v. City of Chicago, 561 U.S. 742, 828, 130 S. Ct. 3020, 3072,
177 L. Ed. 2d 894 (2010) (Thomas, J., concurring in part). When the original
meaning is unclear, it can be discerned from “[t]he historical context of a
constitutional provision,” including constitutional debates and case law. Doe v.
Nelson, 2004 S.D. 62, ¶ 10, 680 N.W.2d 302, 305–06.
[¶54.] Landowners argue that SDCL 21-35-31 authorizes an impermissible
taking of private property without just compensation under both the federal and
state constitutions. United States Constitution amendment V provides that:
No person shall be held to answer for a capital, or otherwise
infamous crime, unless on a presentment or indictment of a
Grand Jury, except in cases arising in the land or naval forces,
or in the Militia, when in actual service in time of War or public
danger; nor shall any person be subject for the same offence to
be twice put in jeopardy of life or limb; nor shall be compelled in
any criminal case to be a witness against himself, nor be
deprived of life, liberty, or property, without due process of law;
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nor shall private property be taken for public use, without just
compensation.
(Emphasis added.) South Dakota Constitution article VI, § 13 provides that:
Private property shall not be taken for public use, or damaged,
without just compensation, which will be determined according
to legal procedure established by the Legislature and according
to § 6 of this article. No benefit which may accrue to the owner
as the result of an improvement made by any private
corporation shall be considered in fixing the compensation for
property taken or damaged. The fee of land taken for railroad
tracks or other highways shall remain in such owners, subject to
the use for which it is taken.
[¶55.] We have determined that the South Dakota provision “provides greater
protection . . . than the United States Constitution because our Constitution
requires that the government compensate a property owner not only when a taking
has occurred, but also when private property has been damaged.” State ex rel. Dep’t
of Transp. v. Miller, 2016 S.D. 88, ¶ 39, 889 N.W.2d 141, 153 (internal quotation
marks omitted). To preserve this distinction, we analyze both constitutional
provisions separately.
The Federal Takings Clause
[¶56.] According to Landowners, SDCL 21-35-31 violates the Federal Takings
Clause by authorizing pre-condemnation surveys, which, in their view, amount to a
per se physical taking of their right to exclude. See Loretto v. Teleprompter
Manhattan CATV Corp., 458 U.S. 419, 102 S. Ct. 3164, 73 L. Ed. 2d 868 (1982)
(holding that a permanent physical occupation constitutes a taking). Landowners
argue that the Supreme Court broadened per se physical takings to include
“temporary or intermittent” invasions of private property, such as the surveys found
in SDCL 21-35-31. See Cedar Point Nursery v. Hassid, 594 U.S. 139, 141 S. Ct.
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2063, 2071, 210 L. Ed. 2d 369 (2021). See also Ehlebracht v. Crowned Ridge Wind
II, LLC, 2022 S.D. 19, ¶ 39, 972 N.W.2d 477, 489–90 (discussing four possible
theories of a takings claim).
[¶57.] SCS responds that “longstanding restrictions on property rights—like
the right to survey access—are not takings.” SCS points out that, in Cedar Point,
the Supreme Court specifically stated that “many government-authorized physical
invasions will not amount to takings because they are consistent with longstanding
background restrictions on property rights.” Id. at 160, 141 S. Ct. at 2079.
Nevertheless, Landowners contend that pre-condemnation surveys are not part of
South Dakota’s legal tradition or common law and thus do not fall within this
exception.
[¶58.] To analyze these competing arguments, we turn first to Cedar Point.
In that case, the Supreme Court was confronted with a statute that “grant[ed]
union organizers a right to physically enter and occupy [agricultural employers’]
land for three hours per day, 120 days per year.” Id. at 149, 141 S. Ct. at 2072. The
Court held that “[t]he access regulation appropriates a right to invade the growers’
property and therefore constitutes a per se physical taking.” Id. Central to this
holding, the Court concluded that “physical invasions constitute takings even if they
are intermittent as opposed to continuous.” Id. at 153, 141 S. Ct. at 2075. However,
the Court qualified its reasoning with three exceptions: 1) “Isolated physical
invasions, not undertaken pursuant to a granted right of access”; 2) Government-
authorized physical invasions consistent with longstanding background restrictions
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on property rights; and 3) Property rights ceded as a condition of receiving
government benefits. Id. at 159–61, 141 S. Ct. at 2078–79.
[¶59.] Here, SDCL 21-35-31 does grant a right of access for survey purposes
to “[e]ach person vested with authority to take private property for public use[.]”
Although such access has certain statutory limitations, including a required 30-day
notice specifying the expected dates of entry, it nonetheless constitutes a taking of
the Landowners’ right to exclude—“one of the most treasured” rights of property
ownership. See Loretto, 458 U.S. at 435, 102 S. Ct. at 3176. The question thus
becomes whether a pre-condemnation survey access falls under one of the Cedar
Point exceptions.
[¶60.] As an initial matter, it is evident that only the second exception could
apply to SDCL 21-35-31 for a party vested with authority to take private property
since survey access does not constitute a trespassory taking or a ceded property
right. Landowners suggest this inquiry should focus on citizens’ historic
understandings “regarding the content of, and the State’s power over, the ‘bundle of
rights’ that they acquire when they take title to property.” Lucas v. South Carolina
Coastal Council, 505 U.S. 1003, 1004, 112 S. Ct. 2886, 2888, 120 L. Ed. 2d 798(1992).
[¶61.] However, even through this lens, pre-condemnation “standard surveys”
are firmly established in the legal tradition of South Dakota in a variety of contexts.
For at least a century, South Dakota statutes have granted condemnors the right to
conduct pre-condemnation surveys. See SDCL 49-33-6 (in effect since 1903 and
granting corporations the right to conduct pre-condemnation surveys for the
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selection of electric light, street railroad, or power line); SDCL 50-6A-19 (regional
airport authorities); SDCL 46A-6-5 (irrigation districts); SDCL 46-8-2.1 (water
works). Landowners are correct that “[a] law does not become a background
principle for subsequent owners by enactment itself.” Palazzolo v. Rhode Island,
533 U.S. 606, 630, 121 S. Ct. 2448, 2464, 150 L. Ed. 2d 592 (2001).
[¶62.] However, in 1916, this Court held that surveys made “prior to or
pending condemnation proceedings . . . certainly did not amount to taking
possession of the tract.” Fairmont & V. Ry. Co. v. Bethke, 37 S.D. 446, 449–50, 159
N.W. 56, 58 (1916). In addition, a jurist previously serving in the Second Circuit
court recently recognized a South Dakota common law survey right incident to
eminent domain. See Dakota Access, LLC v. Schumaker, No. 49CIV15-000941,
Mem. Op. at 16–17 (S.D. Cir. Ct. Mar. 24, 2016). This is evident because “the right
of eminent domain is virtually useless to an entity without the right to survey” prior
to condemnation. Id. at 17 (quoting State v. Crouch, 621 S.W.2d 47, 48 (Mo. 1981)).
[¶63.] SCS also directs our attention to several relevant secondary sources.
The Restatement of Torts explains that,
[t]he privilege of entry for the purpose of performance or
exercise of such duty or authority may be specifically given, as
where an employee of a public utility is in terms authorized to
enter upon privately owned land for the purpose of making
surveys preliminary to instituting a proceeding for taking by
eminent domain.
Restatement (Second) of Torts § 211 cmt. c. The Model Code on Eminent Domain
reflects a similar understanding:
The owner shall not obstruct a condemnor from entering upon
his land prior to filing a declaration of taking for the purpose of
surveying the land or making a specified inspection of same,
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provided that, the condemnor shall compensate the owner for
any virtual damages that may result from his entrance upon the
land.
10 Nichols Appendix D-2 § 308. Even more on point, Nichols on Eminent Domain
states that “[e]ntry by a government agency for purposes of conducting a [standard
survey] generally does not constitute a taking, under either the common law or
under applicable statutory guidelines.” 2A Nichols on Eminent Domain
§ 6.01(16)(b) (2022).
[¶64.] Other states have also adopted similar interpretations. As noted by an
Illinois Appellate Court, the “vast majority of jurisdictions have held that a prior
condemnation suit is not a prerequisite to an entry on the lands of another for
preliminary exploration and survey purposes.” Kane Cnty., 443 N.E.2d at 1153.
“These courts have recognized a basic conceptual difference between a preliminary
entry and a constitutionally compensable taking or damaging of property and have
held that because the former is not a variety of the latter, it does not require
adherence to condemnation procedures and constitutional provisions for just
compensation.” Id. (citing Orange Water and Sewer v. Est. of Armstrong, 237 S.E.2d
486, 487 (N.C. Ct. App. 1977); San Luis Obispo v. Ranchita Cattle Co., 94 Cal. Rptr.
73 (Cal. Ct. App. 1971); Litchfield v. Bond, 78 N.E. 719, 732 (N.Y. 1906); Carlisle v.
Dep’t of Pub. Utils., 234 N.E.2d 752 (Mass. 1968)).
[¶65.] We thus conclude that the right to conduct pre-condemnation surveys
is a longstanding background restriction on property rights. However, the scope of
such surveys is limited. Indeed, we must “pause” when the proposed survey
activities contemplate “a more invasive impact on individual property rights.”
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Dakota Access, No. 49CIV15-000941, Mem. Op. at 14. In Missouri Highway, the soil
survey was a taking because it “subvert[ed] [the landowner’s] right to use and enjoy
his property in fee simple absolute.” 729 S.W.2d at 473. As an Illinois Appellate
Court reasoned, “the right of entry does not include the right to make a permanent
appropriation or cause more than minimal or incidental damage to property[.]”
Kane Cnty., 443 N.E.2d at 1154.
[¶66.] We agree with these holdings and conclude that the circuit courts
partially erred in their takings analyses. Here, SCS seeks to conduct not just
superficial measurements, but also invasive geotech and deep-dig surveys. These
latter activities will involve the use of heavy equipment and substantial disturbance
of the Landowners’ property. In the case of geotech surveys, the resulting holes will
be filled with “drill cuttings or with a cement/bentonite grout mixture” resulting in
a permanent physical occupation of a portion of Landowners’ property, which
undeniably constitutes a taking. See Loretto, 458 U.S. at 427, 102 S. Ct. at 3171.
Geotech and deep-dig surveys—and other similarly invasive activities—thus do not
fall into the second Cedar Point exception and constitute takings under the federal
constitution.
[¶67.] Importantly, however, because we have previously concluded that the
definition of “survey” and “examination” in SDCL 21-35-31 does not include geotech
or deep-dig activities, the statute, properly interpreted, remains constitutional. As
discussed above, the pre-condemnation survey authorization in SDCL 21-35-31
“cannot amount to other than such innocuous entry and superficial examination as
would suffice for the making of surveys or maps and as would not in the nature of
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things seriously impinge upon or impair the rights of the owner to the use and
enjoyment of his property[.]” 9 See Kane Cnty., 443 N.E.2d at 1154 (citation
omitted). This limited interpretation of pre-condemnation surveys comports with
longstanding background restrictions on property rights and does not constitute a
taking under the federal constitution.
The State Takings Clause
[¶68.] Turning to our state constitution, South Dakota Constitution article
VI, § 13 provides that “[p]rivate property shall not be taken for public use, or
damaged, without just compensation[.]” This provision requires compensation
when “state conduct has infringed a recognized property interest.” Schliem v. State
ex rel. Dep’t of Transp., 2016 S.D. 90, ¶ 24, 888 N.W.2d 217, 231. As stated above,
the South Dakota Constitution provides greater protection for property rights than
does the federal constitution. Miller, 2016 S.D. 88, ¶ 39, 889 N.W.2d at 153.
However, the three exceptions in Cedar Point remain relevant to the determination
of what constitutes “a recognized property interest.” Schliem, 2016 S.D. 90, ¶ 24,
888 N.W.2d at 231.
[¶69.] As we have already discussed, limited superficial surveys prior to
condemnation are a longstanding background restriction on property. In other
words, owners take real property subject to a historical understanding that
government may access the property for survey purposes incidental to the power of
9. To be clear, this means that condemnors may only conduct minimally
invasive superficial inspections that will result in, at most, minor soil
disturbances.
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eminent domain. Thus, surveys conducted pursuant to SDCL 21-35-31, as
interpreted above, do not result in a taking of a recognized property interest.
[¶70.] Landowners also argue that SDCL 21-35-31 violates the constitutional
requirement that “just compensation” be determined by a jury. We have already
determined that because SDCL 21-35-31 only authorizes standard surveys
involving the most minimal of subsurface invasions, no taking has occurred in this
case. Therefore, neither the state nor federal constitutions require that
Landowners receive just compensation for SCS’s right of entry as permitted by the
statute. However, South Dakota Constitution article VI, § 13 also requires “just
compensation” when private property is damaged. In addition, Article XVII, § 18
provides that:
Municipal and other corporations and individuals invested with
the privilege of taking property for public use shall make just
compensation for property taken, injured or destroyed, by the
construction or enlargement of their works, highways or
improvements, which compensation shall be paid or secured
before such taking, injury or destruction. The Legislature is
hereby prohibited from depriving any person of an appeal from
any preliminary assessment of damages against such
corporation or individuals made by viewers or otherwise; and
the amount of such damages in all cases of appeal shall, on the
demand of either part, be determined by a jury as in other civil
cases.
This section is directly applicable because SCS claims to be a corporation vested
with the power of eminent domain.
[¶71.] Read together, these constitutional provisions require condemnors to
provide “just compensation” for any damage or injury to property that occurs as a
result of their government-sanctioned entry. To be clear, damage or injury does not
include the value of the right of entry for standard surveys as defined herein which,
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as we have already explained, are not takings of any compensable property interest.
Damage refers solely to those injuries which are beyond the “innocuous entry and
superficial examination” necessary to complete the standard survey. Kane Cnty.,
443 N.E.2d at 1154. Notwithstanding these limitations, even if SCS only performs
standard surveys as authorized by SDCL 21-35-31, any resulting actual damage—
for example damage to crops or a cut fence that allows cattle to escape—must be
justly compensated.
[¶72.] In addition, South Dakota Constitution article XVII, § 18 guarantees
Landowners the right to appeal “from any preliminary assessment of damages” and
have the final amount of damages determined by a jury. SDCL 21-35-31 requires
SCS to “[m]ake a payment to the owner, or provide sufficient security for the
payment, for any actual damage done to the property by the entry.” However, the
statute is silent as to whether a determination of damages under this provision can
be appealed or submitted to a jury.
[¶73.] Nevertheless, SDCL 21-35-31 also contains language providing that
“[t]his section is in addition to and not in derogation of other existing law.” We
therefore conclude that SDCL 21-35-31 does not, nor could it, displace the
constitutional guarantee of a right to appeal and a jury determination of damages
where the SCS surveys cause actual damage. Landowners suggest that damages
must be either paid or secured before the damage occurs. Although this is a correct
reading of Article XVII, § 18, SDCL 21-35-31 comports with this requirement. In
conclusion, SDCL 21-35-31, as strictly interpreted herein, does not violate the state
constitution.
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C. Whether the circuit courts erred as a matter of law
by concluding SDCL 21-35-31 provided adequate
procedural due process.
[¶74.] Landowners next argue that SDCL 21-35-31 violates the due process
clause by taking their private property without adequate procedural due process.
This argument appears premised on the idea that the pre-condemnation surveys
authorized by SDCL 21-35-31 constitute a taking. However, based on our
conclusion that SDCL 21-35-31 does not deprive Landowners of a protected property
interest because pre-condemnation standard surveys are a longstanding
background restriction on property rights, no protected property interest is
infringed by the statute. In addition, Landowners’ ability to obtain just
compensation through condemnation proceedings and a jury determination of any
damages provides adequate due process protections.
D. Whether the circuit courts erred by finding SCS
complied with the requirements of SDCL 21-35-31.
[¶75.] Because summary judgment was not appropriate in this case and
given the limited opportunity for discovery, we decline to address whether SCS
complied with the requirements of SDCL 21-35-31.
Conclusion
[¶76.] We hold that on this record the circuit courts erred in granting
summary judgment because SCS has not demonstrated that it is a common carrier
holding itself out to the general public as transporting a commodity for hire. The
circuit courts also erred in denying Landowners’ motions to continue because
further discovery was central to Landowners’ ability to resist summary judgment.
Landowners are entitled to additional discovery within the scope of SDCL 15-6-26,
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including depositions and the production of unredacted documents related to SCS’s
offtake agreements and business model under terms prescribed by the courts.
[¶77.] In order to provide clarity on remand, we also determine that SDCL
21-35-31 only authorizes limited pre-condemnation standard surveys, as defined
herein. As a result, we conclude that this statute, as strictly interpreted herein, is
constitutional under the takings and due process clauses of the state and federal
constitutions because limited pre-condemnation standard surveys are a
longstanding background restriction on property rights. In addition, SDCL 21-35-
31, read in conjunction with South Dakota Constitution article XVII, § 18,
guarantees a jury determination of any damages caused during the surveys and
thus comports with South Dakota’s unique constitutional guarantees regarding
property rights.
[¶78.] We reverse the grant of summary judgment and remand for further
proceedings consistent with this opinion.
[¶79.] JENSEN, Chief Justice, and SALTER and MYREN, Justices, and
WIPF PFEIFLE, Retired Circuit Court Judge, concur.
[¶80.] WIPF PFEIFLE, Retired Circuit Court Judge, sitting for DEVANEY,
Justice, who deemed herself disqualified and did not participate.
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