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Puntenney v. Iowa Utilities Board

Supreme Court of Iowa

May 31, 2019

IOWA UTILITIES BOARD, A Division of the Department of Commerce, State of Iowa, Appellee, and HICKENBOTTOM EXPERIMENTAL FARMS, INC. and PRENDERGAST ENTERPRISES, INC, Petitioners, and OFFICE OF CONSUMER ADVOCATE and THE MAIN COALITION, Intervenors-Appellees, and DAKOTA ACCESS, LLC, Appellee.

          Appeal from the Iowa District Court for Polk County, Jeffrey D. Farrell, Judge.

         Landowners appeal a district court decision denying a petition for judicial review of a decision by the Iowa Utilities Board authorizing a company to use eminent domain to build a crude oil pipeline.

          William E. Hanigan and Jason R. Lawrence of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellants Richard R. Lamb; Marian D. Johnson by Agent, Verdell Johnson; Northwest Iowa Landowners Association; and Iowa Farmland Owners Association, Inc.

          Wallace L. Taylor of Law Offices of Wallace L. Taylor, Cedar Rapids, for appellants Keith Puntenney, LaVerne I. Johnson, and Sierra Club Iowa Chapter.

          Bret A. Dublinske and Brant M. Leonard of Fredrikson & Byron, P.A., Des Moines, for appellee Dakota Access, LLC.

          David J. Lynch (until withdrawal), Cecil I. Wright II, and Benjamin J. Flickinger, Des Moines, for appellee Iowa Utilities Board.

          Mark R. Schuling and John S. Long, Des Moines, for intervenor-appellee Office of Consumer Advocate.

          Matthew C. McDermott and Espnola F. Cartmill of Belin McCormick, P.C., Des Moines, for intervenor-appellee The Main Coalition.

          David Bookbinder, Washington, D.C., and Scott L. Long of Long & Gilliam, Des Moines, for amicus curiae Niskanen Center.

          MANSFIELD, Justice.

         The Bakken Oil Field has made North Dakota the second leading oil-producing state in our country. Almost all of America's oil-refining capacity, however, is located elsewhere in the nation. For this reason, an underground crude oil pipeline was proposed that would run from western North Dakota across South Dakota and Iowa to an oil transportation hub in southern Illinois. Following a lengthy administrative proceeding, the Iowa Utilities Board (IUB) approved the construction of this pipeline in Iowa and approved the use of eminent domain where necessary to condemn easements along the pipeline route.

         Several landowners and an environmental organization sought judicial review. They contended the pipeline did not serve the "public convenience and necessity" as required by law, see Iowa Code § 479B.9 (2016); did not meet the statutory standard required for a taking of agricultural land, see id. §§ 6A.21(1)(c), .22(1); and did not meet the constitutional definition of "public use" set forth in article I, section 18 of the Iowa Constitution and the Fifth Amendment to the United States Constitution. Two of the landowners also raised claims personal to them. The district court denied the petitions for judicial review, and the petitioners have appealed.

         On appeal, we conclude that the IUB's weighing of benefits and costs supports its determination that the pipeline serves the public convenience and necessity. We also conclude that the pipeline is both a company "under the jurisdiction of the [IUB]" and a "common carrier," and therefore is not barred by Iowa Code sections 6A.21 and 6A.22 from utilizing eminent domain. See id. §§ 6A.21(2), .22(2)(a)(2). In addition, we conclude that the use of eminent domain for a traditional public use such as an oil pipeline does not violate the Iowa Constitution or the United States Constitution simply because the pipeline passes through the state without taking on or letting off oil. Lastly, we determine that the IUB's resolution of the two individual landowner claims was supported by the law and substantial evidence. For these reasons, we affirm the district court's judgment.

         I. Background Facts and Proceedings.

         In October 2014, Dakota Access, LLC (Dakota Access) filed documents with the IUB disclosing its intent to construct an underground crude oil pipeline from western North Dakota to Patoka, Illinois, an oil transportation hub. The pipeline would traverse Iowa from the northwest corner to the southeast corner of the state, passing through eighteen counties over a distance of approximately 343 miles.

         In December 2014, as required by law, Dakota Access held informational meetings, attended by IUB representatives, in each of the eighteen counties. See id. § 479B.4. The following month, Dakota Access filed a petition with the IUB for authority to construct the pipeline. See id. §§ 479B.4-.5. In the petition, Dakota Access sought "the use of the right of eminent domain for securing right of way for the proposed pipeline project." See id. § 479B.16. Various parties requested and were granted permission to intervene, including landowners, trade unions, business associations, and environmental groups.

         On June 8, the IUB filed a procedural schedule for the case in which it identified three issues for consideration:

(a) whether the proposed pipeline will promote the public convenience and necessity, (b) whether the location and route of the proposed pipeline should be approved, and (c) whether and to what extent the power of eminent domain should be granted . . . .

         The hearing on Dakota Access's application took place in November and December 2015. On the first day, the IUB received public comments from over 200 people both in support of and against the pipeline. An eleven-day evidentiary hearing followed. During that hearing, sixty-nine witnesses testified. After the conclusion of the hearing, the IUB received posthearing briefs.

         On March 10, 2016, the IUB issued a 159-page final decision and order. First, it addressed whether the pipeline would promote the public convenience and necessity. The IUB concluded that the public convenience and necessity test should be treated "as a balancing test, weighing the public benefits of the proposed project against the public and private costs or other deteriments as established by the evidence in the record." It also concluded that it could consider "public benefits outside of Iowa" for an interstate oil pipeline. In addition, the IUB noted that climate change is "a very important issue," but that the pipeline "represents, at most, a change in the method of crude oil deliveries that are already taking place and that will continue to take place regardless of whether this pipeline is built." The IUB further found that "the increased safety associated with pipeline transport of crude oil is significant" as compared to existing rail transportation of that oil.

         Continuing, the IUB also found overall economic benefits to Iowa from the construction and operation of the pipeline. And while it observed that it would be impossible to build and operate a pipeline without any environmental impact, it found that the route was "selected in a manner intended to minimize adverse environmental impacts" and specifically "to minimize the possibility of leaks." It added that "Dakota Access has taken reasonable steps to reduce the safety risks associated with the proposed pipeline."

         The IUB required that the parent companies of Dakota Access provide unconditional financial guarantees of the pipeline's liabilities and made a series of modifications to the agricultural impact mitigation plan. Among other things, the IUB required that the pipeline be installed at a minimum depth of forty-eight inches where reasonably possible, that all tiling be repaired and restored, and that Dakota Access provide a GPS map to the landowner of any tiling found during construction.

         Ultimately, the IUB found that the pipeline would promote the public convenience and necessity. It did so primarily for two reasons:

First, the proposed pipeline represents a significantly safer way to move crude oil from the field to the refinery when compared to the primary alternative, rail transport. The most credible evidence in this record, based on data from the U.S. Department of Transportation, shows that the spill incident rate for transport of crude oil by rail transport is three to four times higher than the incident rate for pipeline transport on a ton-mile basis. The oil is going to be produced and shipped as long as the market demands it; given that reality, shipping by the safest available method makes sense.

         Second, in the IUB's view, there would be considerable economic benefits "associated with the construction, operation, and maintenance of the proposed pipeline."

         On the other side of the ledger, the IUB noted that there were potential adverse environmental and agricultural impacts from the pipeline as well as effects on the landowners whose land would be trenched. Yet, with certain precautionary measures in place, it found that the benefits outweighed the costs associated with the project.

         Regarding the pipeline's route through Iowa, the IUB observed that Dakota Access had used a software program that evaluated alternative routes and "developed a route that would avoid those land areas where the pipeline could impact critical structures or habitat." It found that a zigzag route that contained right angles and followed division lines (as proposed by some landowners) would create additional safety issues.

         The IUB then turned to the eminent domain issues. It found that sections 6A.21 and 6A.22 gave authority to a pipeline company under the IUB's jurisdiction to condemn an easement for "public use." It concluded that this statutory public-use requirement had been met. In addition, it determined that constitutional objections to the exercise of eminent domain were resolved by the statutory public-use determination.

         The IUB also considered a series of objections by landowners to the exercise of eminent domain over their specific properties. In several instances, it sustained the objections in whole or in part. Thus, in one case, it required that the route be relocated to avoid additional buildings that were being constructed for a turkey farm. In response to another landowner's plea, the IUB directed the preservation of certain fruit trees that were roosting places for several species of bats. The IUB also refused, on legal grounds, to allow the condemnation of property that was owned by governmental entities such as counties.

         The IUB was not persuaded, however, by landowner Keith Puntenney's objection. Puntenney requested that the pipeline's path be diverted because he wanted to install three wind turbines on his property in the area of the proposed route. But the IUB concluded that there was no "firm plan" to install wind turbines and "it has not been shown that the pipeline would necessarily interfere with the possible future installation of wind-driven turbine generators." As to landowner LaVerne Johnson, the IUB did not agree that the pipeline could not cross his tiling system, although it did require that the pipeline be bored under his tiling system including the main concrete drainage line.

         Following the IUB's final decision and order, several motions for clarification and rehearing were filed. On April 28, the IUB issued an order denying these motions.

         On May 26 and May 27, several petitions for judicial review were filed in the Polk County District Court. The petitioners included Puntenney, Johnson, the Sierra Club, and a group of landowners known as the Lamb petitioners. The petitions were later consolidated for hearing.

         Meanwhile, in June, Dakota Access began construction of the pipeline in Iowa. On August 9, the Lamb petitioners asked the district court to stay any construction activity on their property. The stays would have been limited to construction on the fifteen parcels of land owned by the Lamb petitioners and would not have extended statewide. In their expedited relief request, the Lamb petitioners argued, "Until the pipeline trench is actually dug, petitioners' claims are not moot," and added that "if they do not receive a stay before [Dakota Access's] pipeline trench is dug, any remedy will be inadequate."

         On August 21, the district court denied the request for stay because the Lamb petitioners had failed to seek relief first from the IUB. See id. § 17A.19(5)(c). The Lamb petitioners returned to the IUB, which denied the stay. On August 29, the district court denied the Lamb petitioners' renewed request for a stay. No request was made to this court for interlocutory review of the denial of the stay.

         On February 15, 2017, following briefing and argument, the district court denied the petitions for judicial review. Regarding the question of public convenience and necessity, the court concluded that the IUB had "balanced the pros and cons of the project and entered a reasonable decision based on the evidence presented." It added that the decision was "supported by substantial evidence."

         On the eminent domain question, the district court reasoned that Iowa Code sections 6A.21 and 6A.22 conferred condemnation authority on common-carrier pipelines under the jurisdiction of the IUB. It also found that the condemnations were for a public use, thus meeting the requirements of the Fifth and Fourteenth Amendments and article I, section 18 of the Iowa Constitution. Finally, it overruled the specific claims advanced by Puntenney and Johnson as to the exercise of eminent domain over their properties.

         Puntenney, Johnson, the Sierra Club, and the Lamb petitioners appealed. We retained the appeal.

         II. Standard of Review.

         When an administrative review proceeding is before us, we "apply the standards set forth in section 17A.19(10) and determine whether our application of those standards produce[s] the same result as reached by the district court." Hawkeye Land Co. v. Iowa Utils. Bd., 847 N.W.2d 199, 207 (Iowa 2014) (alteration in original) (quoting Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 589 (Iowa 2004)).

         Accordingly, "we review constitutional issues in agency proceedings de novo." Id. at 208 (quoting NextEra Energy Res. LLC v. Iowa Utils. Bd., 815 N.W.2d 30, 44 (Iowa 2012)); see also Iowa Code § 17A.19(10)(a).

         Regarding an agency's interpretation of a statute:

If the legislature clearly vested the agency with the authority to interpret specific terms of a statute, then we defer to the agency's interpretation of the statute and may only reverse if the interpretation is "irrational, illogical, or wholly unjustifiable." If, however, the legislature did not clearly vest the agency with the authority to interpret the statute, then our review is for correction of errors at law.

NextEra, 815 N.W.2d at 37 (citations omitted) (quoting Doe v. Iowa Dep't of Human Servs., 786 N.W.2d 853, 857 (Iowa 2010)); see also Iowa Code § 17A.19(10)(c), (l).

         Here, we think the legislature clearly vested the IUB with the authority to interpret "public convenience and necessity" as used in Iowa Code section 479B.9. We reach this conclusion for several reasons.

         First, we believe "public convenience and necessity" is a term of art within the expertise of the IUB. See Renda v. Iowa Civil Rights Comm'n, 784 N.W.2d 8, 14 (Iowa 2010) (referring to "a substantive term within the special expertise of the agency").

         In addition, the Iowa Code itself indicates that the legislature wanted the IUB to have leeway in determining public convenience and necessity. Section 479B.9 states,

The board may grant a permit in whole or in part upon terms, conditions, and restrictions as to location and route as it determines to be just and proper. A permit shall not be granted to a pipeline company unless the board determines that the proposed services will promote the public convenience and necessity.

(Emphasis added.) The phrase "unless the board determines" seemingly affords the IUB deference. Otherwise, if the matter were to be left to judicial determination, the statute would say something like, "unless the proposed services will promote the public convenience and necessity."

         Additionally, we have previously held that it is not a judicial function to determine whether a service will promote the public convenience and necessity. See Application of Nat'l Freight Lines, 241 Iowa 179, 186, 40 N.W.2d 612, 616 (1950) ("We have held several times that the determination whether the service proposed will promote the public convenience and necessity is a legislative, not a judicial, function. . . . It is not for the district court or this court to determine whether the commission has acted wisely nor to substitute its judgement for that of the commission.")

         On the other hand, we do not defer to the IUB's interpretation of Iowa Code sections 6A.21 and 6A.22. Chapter 6A is a general eminent domain law that applies to all state agencies, and the term "public use" is not "uniquely within the subject matter expertise of the agency"-here the IUB. Renda, 784 N.W.2d at 14.

         Lastly, we review the IUB's factual findings under a substantial evidence standard. See Iowa Code § 17A.19(10)(f). "The agency's decision does not lack substantial evidence merely because the interpretation of the evidence is open to a fair difference of opinion." NextEra, 815 N.W.2d at 42 (quoting ABC Disposal Sys., Inc. v. Dep't of Nat. Res., 681 N.W.2d 596, 603 (Iowa 2004)).

         III. Standing of the Sierra Club.

         We must first consider two threshold matters-standing and mootness. Dakota Access challenges the standing of the Sierra Club. The Sierra Club is a nonprofit environmental organization. The Sierra Club is asserting the interests of two of its members-Mark Edwards and Carolyn Raffensperger. Edwards lives in Boone and worked for the Iowa Department of Natural Resources as a trail coordinator for thirty years. He submitted an affidavit expressing concern that the pipeline will damage Iowa's waterways, contribute to climate change, and destroy Native American burial grounds and cultural sites.

         Raffensperger lives in Ames. Her home sits about one mile from the pipeline. She submitted an affidavit voicing concern for her own safety and the immediate environment around her property as well as her belief that the pipeline will contribute to climate change, damage Native American cultural sites, and pollute Iowa waterways.

         Dakota Access does not dispute that the Sierra Club can assert the interests of its members for standing purposes. See Citizens for Wash. Square v. City of Davenport, 277 N.W.2d 882, 886 (Iowa 1979). However, Dakota Access points out that Sierra Club has not shown that any of its members owns property on the pipeline route. Accordingly, Dakota Access maintains that the Sierra Club lacks standing.

         We disagree. In Bushby v. Washington County Conservation Board, we adopted the United States Supreme Court's standard for standing in environmental disputes. 654 N.W.2d 494, 496-97 (Iowa 2002) ("The United States Supreme Court has held that plaintiffs in cases involving environmental concerns establish standing if 'they aver that they use the affected area and are persons "for whom the aesthetic and recreational values of the area will be lessened" by the challenged activity.'" (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., 528 U.S. 167, 183, 120 S.Ct. 693, 705 (2000))).

         Here, Sierra Club met the Bushby standard. Sierra Club members Raffensperger and Edwards submitted affidavits describing their use and enjoyment of the rivers, streams, soil, and other natural areas and aesthetics. They described their concerns that the construction and operation of the pipeline would have adverse environmental impacts on those areas that they use and enjoy.

         Raffensperger's and Edwards's concerns are not entirely speculative, remote, and in the uncertain future as Dakota Access suggests. Sierra Club presented the IUB with actual evidence of pipeline accidents that have resulted in millions of dollars in cleanup and damages.

         Nothing in the Iowa Code limits standing in pipeline proceedings to individuals whose property is in the direct path of the pipeline. Section 479B.7 allows any person "whose rights or interests may be affected by the proposed pipeline" to file objections. Iowa Code § 479B.7. Section 17A.19 authorizes any "person or party whose is aggrieved or adversely affected by agency action" to seek judicial review. Id. § 17A.19. The Sierra Club has standing.

         IV. Mootness.

         Dakota Access next argues that the appeal is moot. This presents a closer issue. The pipeline was actually completed two years ago in May 2017 at a cost of approximately $4 billion. Since then it has been regularly carrying crude oil from North Dakota to Illinois. Its capacity is 450, 000 barrels of oil per day. The record does not indicate how much Dakota Access actually paid for easements to bury the pipeline underground in Iowa, but the projected cost was $85 million. Where the pipeline was buried during construction, land restoration has already taken place.

         Iowa Code section 17A.19 states in part, "The filing of the petition for review does not itself stay execution or enforcement of any agency action." Id. § 17A.19(5)(a). In short, it places the burden on the party contesting agency action to obtain a stay. As noted above, the Lamb petitioners' application for a stay from the district court was denied nearly three years ago. They did not seek a stay from this court, nor did they ask to expedite this appeal when it was filed over two years ago.[1]

         Ninety years ago, this court ruled that an eminent domain appeal challenging the taking of the plaintiff's twenty-tree apple orchard was moot once the road in question had been built. Welton v. Iowa State Highway Comm'n, 208 Iowa 1401, 1401, 227 N.W. 332, 333 (1929). We explained,

It is substantiated by uncontroverted affidavit that, subsequent to the decision of the district court in this case, and in the absence of an order staying appellees' actions, the road in controversy was established, and the land in question, including the claimed orchard, was taken and used by the appellees for primary road purposes, and that the road has been fully constructed and paved through the premises involved in this action; that the appellant has perfected an appeal to the district court of Mahaska county, from the award of the condemnation commissioners, as to the amount of his damages, by reason of the taking of the identical property involved in this action, and which cause was assigned for trial in the district court of Mahaska county, to begin on the very day of the submission of this cause to this court. It will thus be observed that, during the pendency of the appeal, the defendant did not obtain a restraining order from this court, as was done in the Hoover Case, supra. This court has the power, upon application being made, to grant a restraining order to maintain the status quo of the parties during the pendency of an appeal, and, when no other means of protection is afforded by the law, there is no hesitancy in granting the order.
It is apparent from the uncontroverted affidavit that the orchard has been taken for highway purposes and the paving laid. No order which we can now make can ...

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