In a bittersweet ruling for property rights, the Iowa Supreme Court last week upheld the use of eminent domain to seize privately owned land for the Dakota Access pipeline. Stretching nearly 1,200 miles, from the oil boom in North Dakota’s Bakken Shale to refineries in Illinois, the $3.8 billion pipeline has been pumping nearly half a million barrels of oil every day since it opened two years ago.
But in that same ruling, the Iowa Supreme Court also rejected the U.S. Supreme Court’s infamous 2005 decision in Kelo v. New London, which upheld a plan by New London, Conn. to bulldoze an entire neighborhood under the guise of “economic development.” Thanks to Kelo, local governments nationwide could take homes and businesses for private developers.
With this decision, the Iowa Supreme Court is now the third state high court to directly reject Kelo, following their counterparts in Ohio and Oklahoma. Although the Iowa Supreme Court sided against the owners, by barring the use of eminent domain for private development, it still set an important precedent against this abuse of power.
The Dakota Access case began back in March 2016, when the Iowa Utilities Board concluded that the project would serve the “public convenience and necessity” and approved both the pipeline and the use of eminent domain. Determined to protect their land, several property owners, along with environmentalists at the state chapter of the Sierra Club, took the Board to court.
Under both the Iowa and U.S. Constitutions, the government may only take private property with eminent domain for “public use,” which has long been limited to infrastructure projects. But in Kelo, a bitterly divided U.S. Supreme Court expanded “public use” into “public benefit,” and declared that the mere promise of new jobs and increased tax revenue could justify using eminent domain. The court even rejected a request by the affected homeowners in New London (who were represented by the Institute for Justice) that would have required a “‘reasonable certainty,’ that the expected public benefits will actually accrue.”
Yet when a similar argument was made for Dakota Access, the Iowa Supreme Court was “unmoved” about “the alleged economic development benefits of building and operating the pipeline.” Instead, the court explicitly rebuked the Kelo decision and even mocked its reasoning:
“If economic development alone were a valid public use, then instead of building a pipeline, Dakota Access could constitutionally condemn Iowa farmland to build a palatial mansion, which could be defended as a valid public use so long as 3100 workers were needed to build it, it employed twelve servants, and it accounted for $27 million in property taxes.”
“In sum, because we do not follow the Kelo majority under the Iowa Constitution,” Justice Edward Mansfield wrote for the court, “we find that trickle-down benefits of economic development are not enough to constitute a public use.”
But Mansfield, along with three other justices, did rule that Dakota Access was a “common carrier,” which in Iowa, counts “as a valid public use, even when the operator is a private entity and the primary benefit is a reduction in operational costs.” Like railroads and public utilities, authorizing eminent domain for a common-carrier pipeline would be constitutional.
“While the pipeline is undeniably intended to return profits to its owners,” Mansfield noted, “the record indicates that it also provides public benefits in the form of cheaper and safer transportation of oil, which in a competitive marketplace results in lower prices for petroleum products.” Instead of focusing on whether or not Iowans will use the pipeline, the Iowa Supreme Court ruled that pipelines should be recognized as common carriers if they merely provide benefits to the public at large, including beyond state borders.
“We are pleased that the Iowa Supreme Court upheld the decision of the Iowa Utilities Board granting a permit, including the use of eminent domain, for the Dakota Access pipeline,” Lisa Dillinger, spokeswoman with Energy Transfer, which built the pipeline, told The Gazette. “The court correctly found that Iowans and the Iowa economy benefit from safe, efficient transportation of important fuels and fuel stock.”
That argument, however, was too much for Justices Charles Wiggins and Brent Appel. Although they agreed with the majority “that incidental economic benefits alone are not enough for a taking to qualify as ‘for public use,’” the two would have declared the Dakota Access takings unconstitutional. In their view, the pipeline shouldn’t qualify as a common carrier “because the Iowa public cannot use and does not derive a direct benefit from it,” while the takings are “unrelated to the purpose of the statute authorizing the use of eminent domain.”
The only justice who fully dissented was Justice Christopher McDonald, who argued that because the pipeline was already built, the case was moot. “What’s done cannot be undone,” he wrote. So while six justices rejected Kelo, a bare majority of four justices upheld the pipeline condemnations.
“We are devastated,” said Dick Lamb, a farmer in Boone County who was one of the affected landowners in the lawsuit. “How can a Texas company be allowed to seize my family farmland for their profit?”
