SDLRC - 2020 House Bill 1093 - SD Legislature establish a pipeline liability fund, to authorize a special fee for extraordinary expenses, and to make a continuous appropriation therefor.
An Act to establish a pipeline liability fund, to
authorize a special fee for extraordinary expenses, and to
make a continuous appropriation therefor.
by the Legislature of the State of South Dakota:
Section 1. That a NEW SECTION be added:
used in this chapter mean:
(1) "Action notice," the director's communication of a
decision on a claim;
(2) "Barrel," forty-two gallons measured at sixty
(3) "Civil recoveries," funds received by the state or a
political subdivision from a third party, other than a pipeline
company, as a result of violations of the law;
(4) "Claim," an invoice submitted to the director of the
SPOIL fund by the state or a political subdivision for an
(5) "Department," the Department of Environment and
(6) "Director," the director of the Division of
Financial and Technical Assistance at the Department of Environment
and Natural Resources;
(7) "Extraordinary expense," a reasonable and legitimate
cost incurred by the state, federally recognized Indian Tribe,
political subdivision, private cooperative, or business entity to
respond to, or that arises from an oil product release from a
pipeline that would not have been incurred but for pipeline
operation, and is incurred due to an oil product release;
(8) "Federally recognized Indian Tribe," the Cheyenne
River Sioux Tribe, Crow Creek Sioux Tribe, Flandreau Santee Sioux
Tribe, Lower Brule Sioux Tribe, Oglala Sioux Tribe, Rosebud Sioux
Tribe, Sisseton Wahpeton Oyate, Standing Rock Sioux Tribe, and
Yankton Sioux Tribe;
(9) "Oil product," any oil, including unrefined oil, oil
produced from oil sand deposits, diluted bitumen, or crude oil;
(10) "Pipeline," all parts of physical facilities
through which any oil product is carried within this state, including
pipe, valves, other appurtenances attached to pipe, compressor units,
metering stations, regulator stations, delivery stations, holders,
and fabricated assemblies;
(11) "Pipeline company," a person or entity who is the
owner of a project or holds a permit from the Public Utilities
Commission for a pipeline;
(12) "Political subdivision," a county or municipality;
(13) "Project," the installation of a pipeline greater
than twelve inches in diameter, or the construction of a supporting
facility in furtherance of carrying any oil product by a pipeline
(14) "Release" any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment, or the abandonment of a
container containing a hazardous substance;
(15) "Secretary," the secretary of the Department of
Environment and Natural Resources;
(16) "Special fee," a fee billed to and paid by a
pipeline company to defray administrative costs and extraordinary
(17) "SPOIL fund," the Releases from Pipeline Oil
(18) "State," this state or any agency of the state that
is vested with the authority to exercise any portion of the state's
(19) "Supporting facility," a structure necessary and
ancillary to a pipeline, including a pressure pump station, housing
facility for project personnel, storage area for tangible property,
or other temporary structure of a pipeline company or its agent.
Section 2. That a NEW SECTION be added:
34A-19-2. SPOIL fund--Purposes--Appropriation.
is established in the state treasury the SPOIL fund. Money in the
fund may be used to pay administrative costs and extraordinary
expenses incurred by the state, federally recognized Indian Tribe,
political subdivision, private cooperative, or business entity
arising out of or in connection with a pipeline. Any interest earned
on money in the fund shall be credited to the fund. The fund is
continuously appropriated to the department.
department shall administer the fund and maintain separate accounts
for each project. The secretary shall approve vouchers and the state
auditor shall draw warrants to pay administrative costs and
extraordinary expenses in accordance with this chapter. All money
received by the department for the SPOIL fund shall be set forth in
an informational budget pursuant to    4-7-7.2 and be
annually reviewed by the Legislature.
Section 3. That a NEW SECTION be added:
34A-19-3. Extraordinary expense--Claims--Procedure.
state, federally recognized Indian Tribe, political subdivision,
private cooperative, or business entity may submit a claim for
extraordinary expense to the director for disbursement from the SPOIL
fund in accordance with this chapter. Each claim under this section
shall be accompanied by a statement of the basis on which it is made,
and true and accurate records and books of account regarding the
extraordinary expense claimed, including copies of checks, vouchers,
warrants, sales receipts, invoices, billings, payroll records, or
similar documents for each extraordinary expense in sufficient detail
to allow the director to reasonably review the claim.
state, federally recognized Indian Tribe, political subdivision,
private cooperative, or business entity receiving a disbursement from
the fund for an approved claim under this section shall keep and
maintain true and accurate records and books of account consistent
with government accounting standards and in the same manner and for
the same period as required by law and shall be available for
inspection by the director.
claim under this section shall be submitted to the director within
ninety days of the date the extraordinary expense is incurred.
or before the first of February of each year, the director shall
provide statements of claim activities for the preceding calendar
year to the secretary, and to any applicable federally recognized
Indian Tribe, political subdivision, private cooperative, and
Section 4. That a NEW SECTION be added:
34A-19-4. Anticipated claims--Pre-approval.
state, federally recognized Indian Tribe, political subdivision,
private cooperative, or business entity may submit a request for
pre-approval of an anticipated claim for extraordinary expense to the
SPOIL fund in accordance with this chapter. Each request for
pre-approval submitted under this section shall be accompanied by a
statement of the basis on which the request is made and a description
of the anticipated extraordinary expense in sufficient detail to
allow the director to reasonably review the request.
a request submitted under this section is approved, the state,
federally recognized Indian Tribe, political subdivision, private
cooperative, or business entity shall provide the director with the
same documentation as required for a claim submitted under    34A-19-3
after the extraordinary expense is incurred. The director shall
review the documents provided under this section to determine whether
the expenditure is consistent with the pre-approval decision and
issue an action notice regarding the director's determination.
Section 5. That a NEW SECTION be added:
34A-19-5. Approval or denial--Action notice--Contents.
director shall approve or deny, in whole or in part, any claim
submitted under    34A-19-3, or any request submitted under
34A-19-4. The director may condition any claim for
extraordinary expense at the director's discretion.
director shall issue an action notice to the state, federally
recognized Indian Tribe, political subdivision, private cooperative,
or business entity, and the pipeline company of the approval or
denial, in whole or in part, of a claim within ten days of receiving
the claim under    34A-19-3, or of a request within ten days
of receiving claim documentation as required under    34A-19-4.
The action notice shall include all approved and denied portions of
the claim, and the rationale for the approval or denial, in
sufficient detail to allow the secretary, political subdivision, and
the pipeline company to review the decision. An action notice may be
accompanied by the records submitted in accordance with    34A-19-3.
claim submitted by the state, federally recognized Indian Tribe,
political subdivision, private cooperative, or business entity is not
payable from the SPOIL fund until the claim is approved by the
director. The director shall authorize disbursements from the fund
for payment of an approved claim to the state, federally recognized
Indian Tribe, political subdivision, private cooperative, or business
entity within forty-five days from the date of the action notice.
Section 6. That a NEW SECTION be added:
34A-19-6. Reimbursements deposited in SPOIL fund.
the state, federally recognized Indian Tribe, political subdivision,
private cooperative, or business entity receives payment from the
SPOIL fund for an extraordinary expense, and subsequently receives
reimbursement through restitution, judgment, settlement,
contribution, or other funding for the expense from any other source,
except civil recoveries, the reimbursement shall be deposited into
the fund. The reimbursement deposited into the fund is a credit to a
pipeline company and shall be used to offset the next special fee
calculated under    34A-19-8. Any reimbursement from federal
sources or civil recoveries shall be deposited only as allocated by
Section 7. That a NEW SECTION be added:
34A-19-7. Deposits to the SPOIL fund.
twenty days of the annual special fee assessment as defined under
34A-19-8, the pipeline company shall make the entire
deposit to the SPOIL fund required under    34A-19-8. The
project account and fund may only be used in accordance with this
Section 8. That a NEW SECTION be added:
34A-19-8. Assessment of special fee--Interest.
special fee shall be assessed annually, starting on January 1, 2021,
on each pipeline beginning operations January 1, 2020, or later, to
be deposited in the SPOIL fund. The special fee shall be calculated
at a rate of two dollars and fifty cents per mile of pipeline
multiplied by a fee of ten cents per barrel on the reported daily
maximum capacity for one day, by each pipeline. If the miles of
pipeline or reported daily maximum capacity changes during a calendar
year for a pipeline, the special fee shall be calculated based on the
highest number of total miles of pipeline and highest daily maximum
capacity at any point during that calendar year. The fee by any
pipeline contributed to the SPOIL Fund may not exceed one hundred
million dollars annually. If the SPOIL fund is not accessed in any
given year, the special fee will be waived until the fund is
total extraordinary expenses shall include the interest computed at
the federal short-term applicable rate as set forth under 26 U.S.C.
6621(b)(3), and in effect on January 1, 2020. Any interest collected
that would exceed the fund cap under this section shall be returned
to the pipeline from which the interest was earned.
Section 9. That a NEW SECTION be added:
34A-19-9. Special fee as continuing lien.
special fee billed under    34A-19-8, including any computed
interest, is a continuing lien on all property owned by the pipeline
company within this state until the total special fee is paid in full
or otherwise finally resolved. The secretary of the Department of
Revenue shall file a notice of the lien describing the property
against which the lien applies in the office of the register of deeds
in the county where the property is located. Upon the filing of
notice under this section, the lien is attached to all property of
the pipeline company within this state and has priority over all
other claims or liens on the property.
Section 10. That a NEW SECTION be added:
34A-19-10. Cease and desist order.
addition to any other remedy provided by law, if a pipeline company
fails to meet the requirements of this chapter, the secretary may
order a full, partial, or conditional cease and desist from all
pipeline operation to the pipeline company, and any person acting on
the pipeline company's behalf. An order to cease and desist under
this section is effective upon service to the pipeline company and
remains effective and enforceable until further order of the
secretary. An appeal from the order shall be filed in accordance with
Section 11. That a NEW SECTION be added:
34A-19-11. Contract between state and pipeline company.
in this chapter prevents the state and a pipeline company from
entering into any contract or other agreement, if the terms of the
contract or agreement are not inconsistent with this chapter.
Section 12. That a NEW SECTION be added:
34A-19-12. Promulgation of rules.
secretary may promulgate rules in accordance with chapter 1-26 to:
(1) Provide criteria for approving or denying claims or requests
(2) Establish a procedure to be available, either before or after
the filing of damages by a claimant;
(3) Maintain an index of all reports entered by the department
under this chapter identifying the date and report number, indicating
the type of damages incurred and requested compensation;
(4) Determine damages to businesses and property;
(5) Develop processes to expedite the claims procedure, and
require the production of relevant documents of the gatherer that is
subject to the complaint;
(6) Develop internal procedures for processing claims;
(7) Establish requirements for the filing of claims;
(8) Establish a schedule of reasonable administration fees
sufficient to cover the actual administration costs associated with
the management of the SPOIL fund; and
(9) Issue payment of claims for certain uncompensated costs and