After the Keystone pipeline spilled 14,000 barrels of crude oil on Kansas pastures and in the creek, Gov. Laura Kelly is about to reconsider the state’s property tax exemption for pipelines.
“I thought we should have done this a long time ago,” Kelly told The Capital-Journal on Tuesday. “Yeah, I think that was a mistake we made… I think it was a big mistake to provide a property tax relief.”
The December 7 pipeline failure occurred on the 36-inch Keystone pipeline 3 miles east of Washington. An estimated 588,000 gallons of oil stained black on the prairie and spilled into Mill Creek. It is the largest onshore pipeline spill in nine years and larger than all of Keystone’s previous spills combined.
Clean-up efforts have been slow. The type of crude oil carried by the pipeline is particularly difficult to clean. After two weeks, just over half of the oil had been recovered. The company advised ahead of the winter storm that the weather could further slow the rate of recovery.
more:While a pipeline operator searches for the cause of an oil spill in Kansas, residents wait for a cleanup
Kansas lawmakers could end the tax credit after the oil spill
Ending the tax credit is likely on a short list of what state lawmakers could do in response to the oil spill as the pipeline falls under federal regulations. Meanwhile, Sen. Mike Thompson, R-Shawnee and chief energy policy maker in the Senate, has expressed reluctance to do more than hold hearings.
TC Energy has benefited from multi-million dollar tax breaks since opening in 2011 and earlier. State lawmakers are passing a package of tax benefits for various energy projects as part of a bid to lure the Keystone pipeline into Kansas.
Legislative records show that Kelly, then in her second year as a senator, was one of two senators to vote against the bill with the pipeline tax exemption in 2006.
Kansas Code 79-227 exempts new oil and natural gas pipelines from property taxes from the start of construction until 10 years after construction is completed.
While she supports ending the tax credit, Kelly, who considers herself to have an “all of the above” approach to energy policy, is not opposed to the oil and gas industry as a whole.
“It was a pleasure to speak at the Kansas Independent Oil & Gas Association conference in Wichita,” the governor wrote on Twitter in August. “This industry is unlocking the potential beneath our feet, putting tens of thousands of Kansans to work, and injecting hundreds of millions of dollars into our state’s economy.”
In 2006, while TransCanada was exploring routing a pipeline through Kansas, lawmakers passed the Kansas Energy Development Act intended to incentivize energy projects. The company later said it had invested more than $680 million in the Kansas economy through the pipeline.
The Cushing Extension of the Keystone Pipeline connects Steele City, Nebraska, and Cushing, Oklahoma. It stretches about 210 miles in Kansas, passing through Washington, Clay, Dickinson, Marion, Butler, and Cooley counties.
more:Kansas senator compares climate change message to Nazi propaganda. Here is what was also said at the oil conference.
Kansas State only along Keystone Road with this property tax exemption
No other state along Keystone Road had such a property tax exemption. Other provisions of the 21-page bill included income tax credits and accelerated depreciation. It included refineries, pipelines, coal-fired power plants, ethanol plants, and fertilizer plants.
The legislative staff estimated that initial provisions of the law would result in a $1.7 million loss in revenue for fiscal year 2009, the only year for which it was estimated. The number assumed that the Keystone pipeline would qualify.
But by 2012, officials estimated that TransCanada was avoiding about $19 million in one year in property taxes. At the time, the Kansas Department of Revenue and local county governments challenged the Tax Appeals Court’s decision to grant the exemption, citing legal requirements for Kansas refineries to access the pipeline.
The Kansas Court of Appeals later upheld the exemption, ruling that while the refineries did not have direct access to the Kansas portions of the pipeline, indirect access from existing pipelines connecting the refineries to Oklahoma satisfied the law because lawmakers did not require otherwise.
“While a request for a direct connection to a ‘qualified pipeline’ by Kansas refineries would benefit Kansans more, that is a question for the legislature, not the courts. They have no authority to do so,” the court held.
The legislature did not amend the statute after the ruling – but he was prosecuted.
In 2017, a bill was to eliminate the exemption for new projects while leaving existing projects unaffected. Local government officials supported it. The bill died in committee after opposition from the Kansas Petroleum Board and other oil and gas companies and lobbyists. Similar proposals met a similar fate in 2015 and 2016.
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