Summit Carbon pushes back against PUC staff motion to deny company permit

Summit Carbon Solutions, a carbon capture company applying for a permit to build part of a $5.5 billion pipeline in South Dakota, has filed an official response to a state regulatory attorney's motion to deny their application.

Summit Carbon responded late Friday after South Dakota Public Utilities Commission staff attorney Kristen Edwards requested an order from commissioners to nix the company's permit hearing earlier that day. The PUC staff motion was made after the Nebraska-based company's requested on Thursday to withdraw a motion to preempt local county ordinances.

Brett Koenecke, Summit Carbon's attorney, asked the commission to deny staff's motion in the company's response letter and have the hearings proceed as scheduled.

Summit Carbon aimed to argue local county setback ordinances, which the company considers overly restrictive, are preempted by federal regulations. Some of these local ordinances were made in response to the company's pipeline route, which some landowners view as a hazard to their safety and well-being.

As a consequence of withdrawing their preemption motion, however, PUC staff requested an order from the commission to deny Summit Carbon's permit on the grounds the company now admits its current pipeline route would not comply with setback distances in Brown, McPherson, Minnehaha and Spink counties based on South Dakota statute.

Also Friday evening, Brian Jorde, an attorney with Nebraska-based Domina Law Group, submitted on the behalf of intervening landowners a joinder supporting PUC staff's motion to deny Summit Carbon's permit for similar reasons.

"Landowners do have evidence on hand of Summit’s use of the legal process to circumvent good faith negotiations with Landowners," Jorde wrote. "Landowners request the PUC take judicial notice of the over 107 condemnation lawsuits against landowners that Summit filed months before now."

In their response, Summit Carbon said it continues to believe these county ordinances have the "intended or unintended effect of hampering [carbon sequestration] projects."

"Despite that continued belief, SCS heard this Commission loud and clear on Wednesday, September 6 when it ruled unanimously that it will not preempt local county ordinances for CO2 pipelines," Koenecke wrote. "For that reason, SCS has withdrawn its motion for preemption."

What is PUC staff's argument to deny Summit Carbon's permit?

PUC staff uses statements made by Summit Carbon COO Jimmy Powell in which he said Brown and Minnehaha counties' setback requirements set in their ordinances would be "unreasonably restrictive as applied to the proposed route" as evidence the company's pipeline would, as currently planned, violate those regulations.

Similar evidence is offered for Spink and McPherson counties through statements made by Erik Schovanec, a senior director for the company.

"[South Dakota Codified Law] 49-41B-22(1) provides that Applicant must prove that the proposed facility will comply with all applicable laws and rules," PUC Staff Attorney Kristen Edwards wrote in the motion filing. "Summit cannot satisfy this burden at this time."

What is Summit Carbon's response to PUC staff's motion?

Summit Carbon argues an interpretation of SDCL 49-41 B-22(1), which reads that a "proposed facility will comply with all applicable laws and rules," gives them grounds to continue their upcoming evidentiary hearing, as it is "forward-looking."

In other words, the statute, with emphasis on the words "will comply," does not demand that the company have all the necessary county permits in hand or necessarily comply with local ordinances at the time of the hearing.

Instead, Summit Carbon argues commissioners can apply a condition to their permit that the company be in compliance with all relevant laws and ordinances at the time of construction.

"That is all SCS is asking for," Koenecke's response reads. "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."

This motion to deny Summit Carbon's permit, which PUC staff plans to request on Monday, does not kill the company's project in South Dakota if approved, as noted in the Friday motion. Summit Carbon is legally able to refile their permit to the commission under South Dakota law, but it would have to adhere to the county ordinances adopted by counties or obtain waivers from landowners going forward.

"Currently, it appears the momentum is against them in even receiving the permit," Dakota Rural Action Lobbyist Chase Jensen told Argus Leader. "They can always drop a new route and come back to the PUC, but this time they'll have to treat people with respect."

The motion also highlights efficiency as a reason to deny the permit. It would be "an exercise in futility," the motion reads, to go through a three-week-long evidentiary hearing with as many 200 witnesses providing testimony when "it is an undisputable fact … that the proposed route violates county ordinances in Brown, McPherson, Minnehaha, and Spink counties."

"Why are we going to waste three weeks of our time and taxpayer dollars going through hearings process when it is just a matter of fact — absolute fact — they are not in compliance and cannot comply with the current route that they have," Jensen said.

Additionally, in a supplemental application filed to the regulatory body by Summit Carbon on Oct. 13, 2022, the company indicated it would "coordinate with county and municipal offices and comply with all applicable ordinances," while the Project itself would "comply with applicable local land use zoning ordinances, building rules, and regulations for above-ground Project facilities."

PUC staff said the claims made in this supplement conflict with the pipeline's current state of noncompliance. Because of this, staff argues there is grounds to deny the company's permit because of a "deliberate misstatement of a material fact" under SDCL 49-41B-13(1).

"These statements are so material that they go to the very heart of Applicant’s burden of proof," Edwards wrote. "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)."

While Summit Carbon's motion to withdraw their preemption argument has yet to be officially approved, PUC staff's request states, "The Motion to Preempt is no longer on the table and Staff offers no views on it at this time."

PUC staff also proffers Summit Carbon's application should be denied based on SDCL 49-41B-13(2), in that the company's application is in general violation of the relevant laws and rules related to energy conversion and transmission facilities.

Because Summit Carbon withdrew its preemption request, their pipeline now no longer complies with local land use controls defined under a state administrative rule, according to PUC staff.

Navigator Heartland Greenway, a competing carbon sequestration company, saw its own permit application be unanimously denied on Wednesday. The Nebraska-based company made a motion to preempt county ordinances, but commissioners also wholly denied this request.

This set the stage for Summit Carbon, who Jensen said had employees observe Navigator's final permit proceedings, to try to adapt their strategy ahead of the start of their own evidentiary hearing on Monday.

"When Summit watched Navigator lose on this false argument that counties can't regulate land use in their jurisdiction, they basically were forced to decide, 'Do we … continue this false argument after it's been proven wrong, or do we get it up knowing that it was the reason Navigator was rejected …and then take our chances moving forward,'" Jensen said. "I don't think that they expected that the staff would come back so quick so hard against them. But it was like the hand that they had was certainly a losing hand, and so they had to fold and hope the next hand worked."

Officials with Summit Carbon were not immediately available for comment.

This article originally appeared on Sioux Falls Argus Leader: Summit Carbon Solutions faces setback in South Dakota