South Dakota says it is “Open for Business,” but recent developments in the state Legislature have some worried its business-friendly model may be changing.
That includes businesses with financial stakes in the state like Gevo, the company behind a proposed billion-dollar corn-based jet fuel plant near Lake Preston.
“The black eye that South Dakota has right now on Wall Street is immense,” said Gevo CEO Patrick Gruber.
He’s referring to HB 1052, a bill the Legislature passed prohibiting the use of eminent domain specifically for carbon oxide pipelines.
Gruber told SDPB if Summit Carbon Solutions’ pipeline doesn’t go through South Dakota, the company will move its plant to another state. This comes after Summit indefinitely paused its application in the South Dakota Public Utilities Commission.
He claims the way the state Legislature handled the pipeline sent ripples farther than Pierre.
“It’s perceived as not a business-friendly state [on Wall Street], changing the rules mid-stream,” Gruber said. “The stuff that’s been done around that pipeline, it’s a travesty.”
At the forefront of the bill was Republican Rep. Karla Lems, its prime sponsor. She said nothing in the law prohibits Summit Carbon Solutions from moving forward with its project.
“If you have a great project that is going to be a boon for the people of South Dakota, and you are doing business in the right way, and it’s a project that you have buy-in for, I think you’re going to get this project done,” Lems said. “I said that at the very beginning that if you take eminent domain off the table, you do business with people in the right way, I believe that you get the project done.”
Gov. Larry Rhoden said he recently spoke with officials from POET, whose ethanol facilities stand to benefit from the pipeline. Rhoden said POET expressed disappointment in the bill. He said he told them the ball is in Summit’s court.
“If Summit chooses not to go forward with a pipeline, that’s their choice,” Rhoden said. “There are still options that they could work on.”
Republican Sen. Casey Crabtree disagrees. He said the concern over HB 1052 is not so much about the pipeline, but about the investments, like Gevo, the state stands to lose from it.
“And so, we are in a tough situation ag-wise. The policies we passed, the policies we discussed are immediately impacting our farmers, our ranchers, and our small communities,” Crabtree said about Gevo’s potential departure. “And I think that’s a concern. I think we can and should do better. And I think we should let conservative leadership lead the way on that.”
Crabtree said there were other ways to handle the issue of eminent domain, but HB 1052 might not have put the state’s farmers and ranchers in the best position to have competitive markets.
Gevo estimated the proposed Lake Preston plant would have generated more than $100 million annually to the area. That includes a model of Gevo purchasing corn from local farmers to eventually turn it into aviation fuel.
Many in favor of the pipeline, including Gruber, say the Legislature sent a message to businesses by “changing the rules” in the middle of the game.
“It’s an unreliable place to do business,” Gruber said.
Republican Rep. Karla Lems disagrees. She believes South Dakota had the rules changed on it in the 2024 legislative session.
“I don’t think it was a level playing field,” Lems said. “For them to say, ‘Change the rules in the middle of the game,’ what were they trying to do with SB 201 last year? That’s exactly what they were trying to do.”
SB 201 required counties to prove their ordinances are reasonable, after the state Supreme Court rejected Summit’s permits citing it failed to follow ordinances for every county it passed through. SB 201 was overturned by South Dakota’s voters in the 2024 general election, with those opposed saying it hurt local control and property rights.
Gevo opposed the Referred Law 21 campaign, contributing $167,000 towards Protect South Dakota’s Ag Future BQC, a group who advocated against it. In the November election, 60% voted to reject the law.
In North Dakota, the Legislature defeated a bill that would have stopped eminent domain use for a carbon dioxide pipeline.
Gruber said states like North Dakota has its “arms wide open.” He said following South Dakota’s 100th legislative session, the message is clear to businesses.
“South Dakota, when we first got interested in that Lake Preston site, it was business friendly state,” Gruber said. “It changed, and that’s sad. And it’s a mistake.”
Though some lawmakers, like Sen. Crabtree, look at that unfavorably, others believe being open for business in the ways Gevo wants isn’t the right path forward. That includes House Assistant Majority Leader, Rep. Marty Overweg.
“We’re open for businesses that want to use the free market the way the rules are. We are open. But if the open for business means we’ve got to give you a bunch of money to buy you to come here, to me, no I hope we’re not open for business that way,” Overweg said. “You know when government takes taxpayer’s money, which is what Gevo wants and Summit wants, and give it to private corporations, in other words picking winners and losers, with taxpayer’s money, that’s not even close to the free market.”
Overweg said he’s fine providing government help, but he wants taxpayer dollars to go to companies who use the free market and create good-paying jobs in South Dakota.
Rep. Lems agreed, saying there are exceptions to the state’s policy.
“South Dakota is open for business, but we are not for sale,” Lems said.
Sen. Crabtree said anyone can claim the state is open for business, but to get a true gauge on it, you have to look at the businesses themselves.
“You can have politicians go ahead and play politics, but the facts are that businesses are telling you that they don’t like it when the state chooses overregulation instead of innovation,” Crabtree said.
Gruber said he understands the politicized nature of the issue and that he hears concerns over eminent domain, but it’s not without ramifications.
“Other states view it as ‘We are going to do agriculture and energy, and we’re gonna have infrastructure. So, yeah, of course we’re gonna have pipelines.’ That’s how other states view it. And, South Dakota’s population today doesn’t wanna do that. That’s their choice, but there’s economic consequence,” Gruber said. “You know, we’d probably be the only ones on Earth willing to build a plant there. And that’s because we have a view that we could do something in the short-term and sequester the carbon ourselves. But anyone else going there? I can’t imagine.”
Gov. Rhoden said he disagrees. He believes South Dakota is, as it always has been, open for business.
“We just were recognized, South Dakota, as the number one state in the nation for economic development. And, South Dakota has the lowest unemployment by far in the nation,” Rhoden said. “Our business community is optimistic and they’re enthusiastic and they’re thriving. So, we still have a lot of opportunity and a lot of potential in South Dakota.”
Sen. Crabtree said in the aftermath of session he sees a lot of people talking about what the Legislature did and celebrating it. He doesn’t feel it should be celebrated.
“I think about a lot of the community and state leaders, farmers and ranchers that have come before us, those that have worked really hard to make the state a better place than what they found it. And they were driven to create opportunities that kept young people in our state,” Crabtree said. “I think a lot of those folks are rolling over in their graves right now with what the Legislature did. Instead of clearing the way for businesses and employees to thrive, we spent the last session trying to pass laws and created more regulation, more bureaucracy, and even started picking winners and losers. I don’t think that’s something we should be proud of.”
In Sioux Falls on the Open for Opportunity Tour, Lt. Gov. Tony Venhuizen indicated he thinks HB 1052 was a new beginning, not a shift in the state’s business mindset.
“There have been some people saying does it send a more general message? I don’t know if it does, I mean we just spent the day meeting with businesses and talking about their development and new facilities and plans to build new facilities and the development in downtown (Sioux Falls),” Venhuizen said. “And not one person has brought it up all day as a factor in their decision making. I really hope that’s an issue we can move on from.”
