Plans for a five-state carbon pipeline were thrown into question last week when South Dakota Gov. Larry Rhoden signed a law prohibiting the use of eminent domain for such projects.
Carbon sequestration is a way for ethanol producers to significantly lower carbon intensity scores. But carbon dioxide has to go through a pipeline to get to a sequestration site.
Permitting issues at the state level have been a barrier to some pipeline projects. With a new administration and Congress focused on rolling back “Green New Deal” measures, it’s unclear how they will proceed.
The South Dakota law could spell trouble for the Summit Carbon Solutions pipeline that was planned to traverse parts of the state.
Monte Shaw, executive director of the Iowa Renewable Fuels Association, said the group’s view is that the South Dakota law effectively bans CO2 pipelines in the state. If this holds, he said it will disadvantage many farmers and ethanol plants there.
Limiting carbon pipelines undercuts President Donald Trump’s energy goals that include the ability to sequester carbon as a key part of American energy dominance.
The proposed project would include 2,500 miles of pipeline through Iowa, Nebraska, Minnesota and the Dakotas. Already, 57 ethanol plants along the route have partnered with Summit.
Rocky journey for pipeline development
After years of back and forth, the company has received sequestration permits in North Dakota and pipeline permits in Minnesota, North Dakota and Iowa.
However, the Iowa Utilities Board's approval provided that Summit could not begin construction until it had approval from North Dakota and South Dakota for the route.
Some South Dakota landowners strongly opposed the project.
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The state Supreme Court sided with landowners in August, ruling that Summit had not proved it is a common carrier, limiting its ability to do surveys without landowner permission. Voters in November rejected a law allowing carbon pipeline developers to sidestep local restrictions.
Initially, state utility regulators rejected the company’s permit application in 2023. Summit reapplied in November 2024 with a route change. Regulators are still considering the route.
In a letter explaining his decision to sign the eminent domain bill, Rhoden said the project is not dead yet. Instead, he hopes Summit uses the opportunity to reset and improve relations with landowners. He also noted that voluntary easements will not be prohibited by the law.
Under a voluntary easement, a landowner agrees to take a payment in exchange for allowing a company to access their land. That way the company doesn't need eminent domain authority.
As of October 2024, Summit said it had secured 75% of the base route in Iowa, 75% of the previous route in South Dakota, 82% in North Dakota and 89% in Minnesota.
Proposed Summit Carbon Solutions PipelineIn a statement after the law was signed, Summit said the move presents obstacles but the project will move forward in states that “support investment and innovation.” The company promised more news "soon."
“It’s very unfortunate that, despite our approvals in Iowa, North Dakota and Minnesota, South Dakota changed the rules in the middle of the game,” Summit wrote. “This kind of regulatory uncertainty creates real challenges — not just for our project, but for the ethanol plants in South Dakota that now face a competitive disadvantage compared to their counterparts in neighboring states.”
Other carbon pipeline projects have been scrapped recently. Navigator CO Ventures announced in 2023 that it had canceled its Heartland Greenway pipeline project due to “the unpredictable nature of the regulatory and government processes.”
Carbon pipelines key part of ethanol production
IRFA's Shaw said a pipeline in South Dakota would be a “big red easy button,” for Iowa ethanol producers and farmers seeking lower carbon intensity scores. However, he said the law does not signal the end of the road.
“There are many places to sequester carbon,” Shaw said. “There are many ways to get there that do not involve a pipeline in South Dakota.”
Monte Shaw, Iowa Renewable Fuels AssociationShaw said there’s high demand for “ultra” low carbon ethanol around the world and in the United States. Ethanol producers are looking for ways to access markets and one hiccup in South Dakota is not going to stop it, he said.
Specifically, he cited low carbon fuel standards in California, Oregon, Washington and New Mexico that push for ultra-low carbon ethanol. Other states are exploring fuel standards that could model these. Some of the largest ethanol export markets, like the United Kingdom, European Union and Canada, also have low carbon fuel standards.
In the private market, airlines are also itching for low-carbon fuel, Shaw said.
“It doesn't matter whether you think the issue of reducing carbon is silly or smart or stupid,” Shaw said. “It doesn't matter. These are what our customers want.”
Carbon capture and sequestration (CCS) is the biggest and easiest way for ethanol producers to reduce carbon intensity. Ethanol plants could invest millions of dollars in on-site technologies that lower carbon, but it’s more costly and less beneficial than sequestration, Shaw said.
There are other ways to transport carbon, including rail, but carrying carbon through pipelines is cheaper. Shaw noted that Illinois could be a destination for a pipeline that avoids South Dakota.
Shaw said there are plenty of ways Summit can keep the project alive and said he'd be shocked if the company simply abandoned the project rather than exploring alternatives.
While Shaw took an optimistic approach to broader political support for carbon sequestration, Doug Durante, executive director of Clean Fuels Development Coalition, was more skeptical.
“We're going kind of backwards in our emphasis on carbon,” Durante said. “So I think if you had a pipeline … what’s the value?”
Durante pointed to efforts by the Trump administration to eliminate climate initiatives, language and programs. USDA scrubbed certain websites related to climate change. Recently, the Department of Energy also rebranded “sustainable aviation fuel” as “synthetic aviation fuel.”
Trump and some Republican lawmakers have also sought to scale back the Inflation Reduction Act. Signed by former President Joe Biden in 2022, the law updated the 45Q tax credit to offer $85 per ton of carbon sequestered to incentivize the use of carbon capture and storage.
Pipeline projects like Summit seek to claim this credit.
Lowering carbon intensity scores through sequestration can also change the credit amount fuel producers receive through the 45Z Clean Fuel Production Credit. This was also included in the IRA and replaced expiring biofuel credits.
Some Republicans have made it clear that they want some IRA provisions, including 45Z and 45Q, to be preserved in upcoming tax reform and budget reconciliation bills. But it’s unclear exactly how Congress and the administration will handle these efforts.
Without credits or incentives, Durante said it could alter the calculation and value of ethanol.
“I think it unfortunately kicks one of the legs of the stool out from under ethanol,” Durante said. “Again, if there’s no governmental or societal value for reducing carbon.”
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