A ruling is expected in about a month from the Kansas Court of Tax Appeals regarding a property tax exemption worth $200 million dollars or more for TransCanada, operator of the Keystone Pipeline.
Lawmakers granted the exemption to lure TransCanada to build a leg from Steele City, Nebraska to the oil storage hub at Cushing, Oklahom, crossing six counties in Kansas.
Now the Department of Revenue hopes to deny the tax exemption, arguing that the company violated the terms of the legislation.
Attorney Bill Waters argued the case on behalf of the Director of Property Valuation, saying the pipeline didn’t meet the terms of the legislation granting the exemption.
“The statute requires that refineries in Kansas have access to the pipeline,” Waters said.
“TransCanada contends they do have access because they get the crude oil out of Cushing, Oklahoma, via existing pipelines other than the TransCanada Pipeline. The Director’s contention is that the statute requires access to the pipeline in this state. ”
For 2011, the tax exemption is worth nearly $19 million, and the numbers for this 2012 are expected to reach twenty million. Those figures do not include losses to local taxing districts supporting school districts and community colleges.
The Kansas Legislature added pipelines to an existing list of capital improvement projects that qualify for the exemption from state and local property taxes, provided they meet four requirements.
One of those requirements is that Kansas refineries have access to the pipeline.
The pipeline currently moves between hundreds of thousands of barrels per day from the oil sands of Alberta, Canada to Steele City, where about half is routed across Missouri to southeastern Illinois, and the other half goes to Cushing.
Industry observers say that oil in Cushing is currently “landlocked,” artificially lowering prices in the Midwest. TransCanada and several other companies are now moving forward with plans for new pipeline access between Oklahoma and the Gulf Coast.
The case was argued before the Court of Tax Appeals Tuesday, and Waters expects the court to rule on the case fairly quickly, within the next three to four weeks.