After Keystone Oil Spill, Kansas Democrats Want to Cancel Tax Exemptions When Pipelines Leak

Washington, KS-

After the Keystone spilled more than half a million gallons of crude oil onto native prairie and cropland and into a creek, some Kansas lawmakers want oil companies to forfeit their tax exemptions when pipelines burst.

Right now, energy companies that lay pipelines in Kansas get to skip out on the first 10 years of paying taxes to school districts, county governments and other local units of government along their routes.

A group of 21 Democratic state lawmakers want to tweak Kansas law so that the exemption ends immediately if a pipeline carrying substances such as oil or natural gas spills or leaks within those 10 years.

“If you want state dollars to do a project, then you have to prove to be good stewards of our state’s land,” state Rep. Rui Xu said. “A spill like the Keystone spill obviously does not satisfy that.”

He expressed some frustration that the proposed legislation wouldn’t apply to the current Keystone situation. The bill can’t function retroactively. Additionally, the Keystone pipeline’s decade of freedom from property taxes recently ran out.

But companies still enjoying that freedom for newer pipelines or planning to capitalize on it for future ones would need to keep their pipelines spill-free for the full decade.

In the case of a spill or leak within that time frame, a company wouldn’t just forfeit the rest of the 10-year exemption — it would have to cough up back taxes for all the previous years that the pipeline was exempt.

The money would get split up among the schools and other local taxing units along the route.

One leg of the Keystone pipeline runs north to south through Kansas, from Washington County on the Nebraska border down through Clay, Dickinson, Marion and Butler counties to Cowley County on the Oklahoma border.

Another leg cuts diagonally across the northeast corner of the state through Marshall, Nemaha, Brown and Doniphan counties.

The effect of the Keystone finally landing on the tax rolls was particularly dramatic for Washington County, where the pipeline instantly became the biggest source of local tax revenue. The Washington County News reported last month that two school districts, the county and other local units of government will collect more than $1.9 million from TC Energy this year.

The Keystone is TC Energy’s largest oil pipeline system. It carries a non-conventional crude oil called diluted bitumen, or dilbit, from Alberta to Illinois, Oklahoma and Texas.

That dilbit from the Canadian tar sands doesn’t behave like regular crude oil, and poses special risks and challenges when it spills.

TC Energy said this week that bad welding and other problems contributed to the Keystone’s largest spill ever when the pipeline burst Dec. 7 in Washington County.

The company is under a federal order to continue analyzing what happened and whether other sections of the north-south stretch of pipe through Kansas are similarly vulnerable.

The Pannbacker family in Washington County, whose farm was left partly covered in crude oil from the spill, has expressed frustration that the federal government allowed TC Energy to resume pumping oil through the segment in late December, even as the investigation into what went wrong continues.

Read more about the Keystone spill in Kansas:

Celia Llopis-Jepsen covers the environment for the Kansas News Service. You can follow her on Twitter @celia_LJ or email her at celia (at) kcur (dot) org.

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