Iowa Supreme Court Says Condemnation of Farmland for Dakota Access Pipeline was Constitutional

In a case of significant import to Iowa property owners, the Iowa Supreme Court today ruled that the use of eminent domain for the Dakota Access pipeline was not an unconstitutional taking under either the Iowa or U.S. Constitutions.  In Puntenney v. Iowa Utilities Board, No. 17-0423 (Iowa May 31, 2019), the Court also held that the Iowa Utilities Board (Board) acted within its discretion in determining that the pipeline would promote the “public convenience and necessity.”

Background

This case concludes a four-year struggle by landowners challenging the creation of a 343-mile crude oil pipeline across Iowa. The pipeline, which was completed in May of 2017 at a cost of $4 billion, runs diagonally through Iowa, passing through many acres of Iowa’s best farmland. The pipeline, which can carry up to 450,000 barrels of oil per day, transports the crude from the Bakken oil fields in North Dakota to a refining station in Illinois. While most impacted Iowans ultimately signed voluntary easement agreements with Dakota Access, LLC, the private Texas company constructing the pipeline, others did not. Their land was condemned, and the pipeline was built.

Several of these landowners, along with the Sierra Club, sought judicial review of the Board’s actions in approving the pipeline and authorizing the condemnation. On February 15, 2017, the Polk County District Court denied their petition, ruling that the Board had acted within its discretion and that the decision to grant the pipeline permit was supported by substantial evidence. The district court also ruled that because the condemnation of the petitioners’ property was for a “public use,” it did not violate the Iowa or U.S. Constitutions.  The petitioners appealed, and today the Iowa Supreme Court affirmed the district court’s decision.

Iowa Utility Board Authority – “Public Convenience and Necessity"

The Court first considered whether the Board had acted within its statutory authority when granting Dakota Access a hazardous liquid pipeline permit. Iowa Code § 479B.9 authorizes the Board to grant a permit after a finding of “public convenience and necessity.” Iowa Code §479B.14 allows the board to vest "pipeline companies" with the right to eminent domain “to the extent necessary” when the board issues a permit.

The petitioners argued that the pipeline did not serve the public convenience and necessity because (1) it primarily benefitted shippers, (2) drilling in the Bakken fields had declined, (3) rail transportation is safer than the pipeline, and (4) secondary economic benefits to the state should not have been considered.

The Court, however, found that the Iowa Legislature had vested the Board with the authority to interpret the statutory meaning of “public convenience and necessity.” As such, the Court reviewed the Board’s decision only to ensure that it was not “irrational, illogical, or wholly unjustifiable.”  Applying this deferential standard, the Court upheld the Board’s decision, finding that it properly applied a balancing test when making its public convenience and necessity determination.

Condemnation of Iowa Farmland – Iowa Code § 6A.21

The Court next considered the petitioners’ argument that Iowa law prevents the condemnation of agricultural land for private development purposes unless the owner of the agricultural land consents to the condemnation. Iowa Code § 6A.21(1)(c). The Court rejected the petitioners’ argument, finding that Iowa Code § 6A.21(2) excepts from this limitation condemnation related to a permit granted to a company under the jurisdiction of the Board. Dakota Access, the Court found, was such a company. The Court also ruled that Dakota Access was a “common carrier” entitled to condemnation under Iowa Code § 6A.22(2)(a)(2).

Constitutional Taking

The final and most important decision of the Court was whether the condemnation of the petitioners’ land by Dakota Access, a private company, was an unconstitutional taking under either Iowa Const. art. I, § 18 or U.S. Const. amend. V. Both provisions state that “private property shall not be taken for public use without just compensation.” Although finding that Iowa’s Constitution, as historically interpreted by the Court, provides stronger protection to private landowners than does the U.S. Constitution, the Court concluded that the petitioners’ constitutional rights in this case were not violated.

This decision turned on whether the Dakota Access pipeline furthered a “public use.” The petitioners argued that the indirect economic benefits stemming from a private project could not be considered a valid public use. They also argued that the Dakota Access pipeline could not serve a public use within Iowa because it did not pick up or drop off oil within the state.    

The Court reviewed the seminal U.S. Supreme Court case of Kelo v. City of New London, 545 U.S. 469 (2005). In this controversial case, a bare majority ruled that a city could constitutionally require private homeowners to turn over their homes to a private developer because the city’s plan served a “public purpose.”

It was the Kelo dissent, however, that the Iowa Court applied, stating, “Like our colleagues in Illinois, Michigan, Ohio, and Oklahoma, we find that Justice O’Connor’s dissent provides a more sound interpretation of the public-use requirement.” Specifically, “trickle-down benefits of economic development are not enough to constitute a public use.” In her Kelo dissent, Justice O’Connor listed several traditional categories of takings that comply with the “public use” requirement: (1) transfer of private ownership to public ownership for an improvement like a hospital or a road and (2) transfer of private property to private parties, like common carriers (i.e. a railroad or a public utility), who make property available for the public use.

The Iowa Court ruled that the Dakota Access pipeline fell into the second category of “traditionally valid public uses,” because it was a transfer of private land to a common carrier, akin to a railroad or a public utility. The Court stated that this type of transfer has long been recognized in Iowa as a valid public use, even when the operator is a private entity and the primary benefit is a reduction in operational costs. The Court went on to find that the Dakota Access pipeline will lead to “longer-term, reduced prices on refined products and goods and services dependent on crude oil and refined products.” Finally, the Court stated that it did not believe that a common carrier of raw material essential to Iowa’ economy was prohibited from using eminent domain merely because the product was not produced or processed in Iowa. “The Iowa Constitution does not hang on the presence of spigots and on-ramps.” The Dakota Access pipeline, the Court concluded, meets the characteristics of a public use under the Iowa and United States Constitutions.[i]

Dissent

Not all justices joined Justice Mansfield’s majority opinion. Justice Wiggins, joined by Justice Appel, concurred in part, but dissented from the majority’s conclusion that the use of eminent domain in this case did not violate the Iowa Constitution. Wiggins did not agree that the pipeline fell within the common carrier exception because the crude oil passing through the Dakota Access pipeline would not be directly available to Iowans. For such a taking to be constitutional, Wiggins argued that the condemning sovereign’s public must be able to use the property taken. Justice Wiggins also stated that the purpose of Iowa Code 479B, the statute authorizing eminent domain in this case, was to protect landowners and tenants from environmental or economic damages resulting from the construction or operation of a hazardous liquid pipeline. This, he argued, did not correspond to the purpose of the pipeline, which was to facilitate the private transportation of crude oil and answer the oil industry’s desire for a pipeline.

Justice McDonald dissented entirely, arguing that the appeal was moot and should have been dismissed. He wrote that because the pipeline was already in the ground, no relief was available to the petitioners. The majority had recognized that while dismantling the pipeline would not be feasible, the Board still had authority to “impose other terms, conditions, and restrictions to implement a ruling favorable to the petitions.” As such, the majority ruled that the appeal was not moot.

Conclusion