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Pipeline company may be forced to pay up

Senate bill may be introduced

Managing editor

There’s a glimmer of hope that Kansas legislators may have an opportunity to bring millions of dollars of tax revenue to the state for 10 years.

The question is will they seize the opportunity?

The Kansas Senate Committee on Federal and State Affairs wrote the Senate bill, which would impose a payment in lieu of property tax on certain qualifying crude oil pipelines, more specifically TransCanada Keystone Pipeline, being constructed through six Kansas counties, including Marion County.

When the Kansas Senate met Tuesday, the bill had not yet been introduced to the Senate for consideration.

What exactly is the bill and what does it mean to Marion County?

The bill would provide payment in lieu of property taxes pursuant to a previous state statute, based on 2006 estimates of a $271 million investment in Kansas by the pipeline company.

The estimate of investment in 2009 was $740 million, making a $469 million variance.

The Senate bill being considered would require a 3 percent payment by the pipeline company of $740 million, resulting in $22.2 million per year for the next 10 years to be divided among the six Kansas counties.

Of that, Marion County could receive $3.8 million per year, which would be distributed to all county taxing districts including schools. The amount is based on the number of miles of pipeline in the county. In Marion County, there will be 36 miles.

What does this mean for the county budget?

Currently, the county levies $6.2 million. That could increase to $10 million during the 10-year exemption period.

The proposed pipeline project has been a concern for Marion, Butler, Clay, Cowley, Dickinson, and Washington counties because exemptions were promised to the Canada-based company that could have cost the state hundreds of millions of dollars in lost revenue.

Speculation was the pipeline could have bypassed Kansas if the state was not willing to concede.

“Officials had talked with Marion County Commission before the exemption was even discussed,” County Commissioner Dan Holub said. “If they would have bypassed Kansas, the cost would have doubled. There was never any question about it going through Kansas.”

He continued that to his knowledge, the pipeline company did not request an exemption but was offered one by state officials.

K.S.A. 70-32,223 allows exemptions to pipeline companies if the pipeline is used primarily for transportation of crude oil or natural gas liquid and has a length of more than 190 miles in the state to which refineries or natural gas liquid processing facilities in the state have access.

This particular pipeline would transport the product with no intent of distributing it anywhere in Kansas.

If the Senate approves the bill, a similar bill could be introduced in the House. If that bill is approved, then counties could budget for the windfall for the next 10 years.

Last modified April 1, 2010

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