Eminent Domain and the Bakken Pipeline Redux

The Dakota pipeline carries oil from North Dakota to Illinois through Iowa, but does not pick up or drop off product in this state. A while back, I wrote a post about the pipeline and the fight over the use of eminent domain to acquire Iowa land for its construction. That post noted that in May 2016, the Iowa Utilities Board (IUB), over the objections of certain environmental groups and landowners, granted the pipeline company a permit for the pipeline’s construction. The IUB found that the pipeline would “promote the public convenience and necessity,” in the language of the statute. The IUB then granted the company the right to use eminent domain if necessary to acquire right of way for the project. The objectors appealed to the Iowa district court, which upheld the IUB’s ruling. The objectors then appealed to the Iowa Supreme Court, which issued its ruling on May 31, 2019, upholding the IUB’s decision, 4-3.

The initial question the Court needed to answer was who, in the first instance, decides whether a project “promotes public convenience and necessity,” the agency or the courts.  The Court found that the legislature intended that the IUB be the body that determines what projects meet the test. That being the case, on judicial review of the agency’s decision the courts, following general principles of administrative law, do not remake the determination. Instead, the courts review the IUB’s decision to ensure that it was not “[b]ased upon an irrational, illogical, or wholly unjustifiable application of law” and that its factual determinations were supported by “substantial evidence.”  The Court held the IUB’s ruling had met the tests; that is, it was rational and based on the evidence presented. 

Next, the Court took on what it called the most significant issue in the case: whether the use of eminent domain for the Dakota Access pipeline violated the Iowa Constitution’s prohibition on taking private property except for public use. The Court’s focus was on whether the public benefits of a project must be direct or whether indirect benefits are enough. In that regard, the Court found that, even though Iowans could not directly access the pipeline, the pipeline provides beneficial side effects in the form of cheaper and safer transportation of oil, which in a competitive marketplace results in lower prices for petroleum products for all, including Iowans. The Court noted that Iowa benefits significantly from lower fuel prices pointing out the very interesting facts that, “Iowa is fifth in the country in per capita energy use [and] eighth in the country in per capita gasoline consumption.”

The decision was not unanimous, however. Justice Wiggins, joined by Justice Appel, dissented, arguing that the use of eminent domain to acquire the necessary right of way for the pipeline that simply runs through the state is not authorized by the Iowa constitution “because the Iowa public cannot use and does not derive a direct benefit from it.” He argued that the indirect or secondary benefits to Iowa relied on by the IUB are not sufficient.

Justice McDonald also dissented, but on the grounds that the case was moot. By the time the case got to the Supreme Court, the pipeline was built and operating. Therefore, there was nothing meaningful for the Court to do. Or, as Justice McDonald put it, “What’s done is done.”

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David Ferree is an Iowa attorney practicing transportation law, airport law, eminent domain, real estate law, and construction law. If you have any questions about this post, feel free to contact him via the Contact Us section of the site.