A Kansas appeals court has refused to reconsider its ruling that a Canadian company qualifies for an exemption allowing it to avoid paying nearly $19 million in property taxes on a pipeline bringing oil into the U.S.
It’s unclear whether the Department of Revenue will appeal the Court of Tax Appeals ruling after the court announced its decision Wednesday. A spokeswoman for the Revenue Department said she couldn’t comment because of ongoing litigation.
Officials in six counties – Butler, Clay, Cowley, Dickinson, Marion and Washington – crossed by the Keystone pipeline said they are losing millions of dollars because of the ruling.
DOR’s property valuation division has argued the state’s three refineries don’t have direct access to the pipeline’s oil, which it claims is required under the law establishing the exemption.
Kansas lawmakers passed the property tax exemption in 2006 when Calgary-based TransCanada was exploring the route through Kansas. The law was designed to encourage energy projects in the state and included income tax credits, financing and 10-year property tax exemptions for such projects, including pipelines.
Kansas is the only state along the Keystone pipeline route with such a property tax exemption.
The Court of Tax Appeals said in its ruling the law doesn’t require the refineries to have direct access to the pipeline. The judges noted the refineries are getting the oil indirectly, satisfying stipulations of the law.
The section in Kansas is separate from TransCanada’s disputed Keystone XL project, which has not begun construction. But the Kansas section would link Keystone XL to facilities in Cushing, Okla., and onto the Gulf of Mexico.
TransCanada did not immediately respond to a message requesting comment Friday.
At the Statehouse, Republican lawmakers supported the court’s decision, while Democrats expressed concern about shifting the tax burden to individuals and smaller businesses.
House Energy and Utilities Committee Chairman Carl Dean Holmes, a Republican from Liberal, said the law wasn’t aimed only at Keystone, but the entire energy industry, to encourage the expansion of refineries and the construction of plants producing ethanol and other products.
Holmes said the state’s three refineries – down from 20 three decades ago – need about 335,000 barrels of oil a day for full operations, more than three times the amount produced in Kansas. By using the tax break to encourage construction of the pipeline, the state was helping to keep the refineries in operation – and helping meet U.S. energy needs.
“I was looking at this globally,” Holmes said.
But Rep. Ed Trimmer, a Winfield Democrat, said allowing Keystone to avoid taxes simply shifts the burden for funding local government to other businesses and homeowners. The pipeline runs through Trimmer’s south-central Kansas district, and he said the company should pay its fair share of taxes.
“I think they’d have built the pipeline anyway,” he said. “This means, essentially, that they pay nothing in taxes.”