PIERRE - South Dakota likely would run into constitutional problems if it tried to put a state fee on interstate underground pipelines to pay for cleaning up spills and leaks, a state lawyer told a task force Monday.
Joe Nadenicek, a lawyer with the state Department of Environment and Natural Resources, said the U.S. Constitution gives Congress jurisdiction over interstate commerce, and states are generally prohibited from interfering with interstate commerce.
Nadenicek talked with the South Dakota Underground Task Force, which was created by the Legislature to study state laws and rules on pipelines used for water, natural gas, crude oil, ethanol, gasoline and diesel fuel. The panel was set up in response to a Canadian company's project to build a crude-oil pipeline through 10 eastern South Dakota counties.
Congress has specifically precluded states from passing laws on interstate pipeline safety because that issue is handled by federal law, Nadenicek said.
If the state tried to put a fee on interstate pipelines to finance a cleanup fund, courts might rule that such a state law is precluded by a U.S. law that sets up the federal Oil Spill Liability Trust Fund, Nadenicek said.
In some cases, states can regulate interstate commerce if they treat interstate and intrastate businesses the same, have a legitimate interest such as protecting the environment, and use reasonable means, Nadenicek said.
Task force member Dennis Davis, director of the South Dakota Association of Rural Water Systems, asked whether the DENR could write a proposed law that would meet constitutional requirements.
Nadenicek said he is not sure anyone could write such a bill that would withstand a constitutional challenge.
In any event, the DENR has taken the position that an existing cleanup fund is adequate to address any anticipated problems, Nadenicek said. The DENR adopted that stance during consideration of the TransCanada Keystone project that is building a crude-oil pipeline through eastern South Dakota, he said.
Public Utilities Commission chairman Gary Hanson, leader of the task force, said it's questionable whether the state could make a particular pipeline pay into a cleanup fund, but such a fund could be supported by general taxes.
Brian Walsh of the DENR said South Dakota and many other states have set up pollution cleanup funds using a variety of funding sources, but no states have used fees placed specifically on pipelines. Some have used general taxes on oil production, he said.
South Dakota's Regulated Substance Response Fund now contains about $2.5 million, and it is mostly funded by fines and penalties assessed to companies for violations related to air and water pollution, Walsh said.
In every case, whoever is responsible for the leak or spill is responsible for cleaning up pollution, officials said. A state or federal fund is used when a company that is responsible for pollution cannot pay.
From 1998-2008, South Dakota had nine significant pipeline accidents, with an average cleanup cost of $200,000, Walsh said. The most expensive incident cost $476,000.
During that same decade, the nation had 5,921 pipeline incidents with an average cleanup cost of $607,000, Walsh said.


