House Balks at Pipeline Tax, Misses Easy Money

Last updated on 2011.02.16

Why is a pipeline tax so hard to pass? Most legislators are terrified that if they vote to raise property tax or sales tax or even whisper income tax, voters will kick them out and take them away from the great Pierre rib buffet. I understand that; heck, for free ribs, I might rejoin the GOP, too.

But who—WHO?!?!—in South Dakota is going to kick and fuss if our Legislature slaps a tax on TransCanada's tar sands pipelines? House Taxation just booted one pipeline tax, HB 1189, to the 41st day. What are you people (yes, you too, Kirschman!) afraid of? What political or economic impacts are scaring you into keeping your brown noses up TransCanada's very oily bottom?

Let's consider: the pipeline tax would hit basically one company: TransCanada. They're from Canada. The money, just like the oil, comes from Canada. O.K., a little oil in Keystone XL will come from Montana and North Dakota, but none comes from South Dakota! Not one voter in South Dakota will directly pay this tax! Why would you not impose a tax that none of your constituents would notice?

Oh, but a pipeline tax might drive up our gas prices, you say? Baloney. HB 1189 asks for two cents per barrel. At current prices, that's a 0.02% tax. TransCanada plans to use its Keystone system to drive our oil prices up by $6.55 per barrel. That's 327 times the amount HB 1189 asks to tax them!

The laughter you hear, legislators, is the TransCanada lobbyists out in the hall, gasping between chuckles, "Boy, we've got these rubes over a barrel!"

But who's over whose barrel?

Keystone I is in the ground. Tax it. TransCanada can't move it.

Keystone XL is coming through our state (unless Secretary Clinton surprises us). Tax it. TransCanada won't reroute it.*

The Keystone pipeline system threatens our environment as much as our sovereignty and our land rights. However, we could turn tar sands to tar-sands-ade and make those pipelines a fiscal goldmine. You could tax those pipelines and not directly impact a single South Dakotan. You could tax TransCanada at 50 cents a barrel, and even if TransCanada passed the full cost on to us at the pump, we'd see a one-penny-per-gallon increase (compare that to the 15 cents a gallon the Keystone system will add to Midwest gas prices if all goes according to TransCanada's plan).

And remember: hit those oil barons up for 50 cents a toxic barrel (about a 0.6% tax on the value of the product, much less than the sales tax you charge me), and when the whole Keystone system is up and pumping over a million barrels a day across our fair prairie, you could see $200 million dollars a year in the state coffers. You could eliminate the Rounds structural deficit in one fell swoop and have another $70 million in mad money, all from one source, from one tax that not one of your constituents pays. The only people paying are foreigners! You legislators should love this!

A pipeline tax should be a no-brainer. No discernible impact on South Dakota taxpayers, no loss of business, no negative political ramifications... and if you jack it up, one vote makes you budget heroes. Heroes. (Yes, do repeat that word. Let it echo in your imagination.)

The Senate version, SB 180, still awaits committee hearing, as Senate Commerce and Energy Chair Tom Nelson has deferred it twice. Legislators, you still have a chance to get it right. Capture this revenue. Tax the pipelines.

Update 2011.02.16 12:22 CST: Then again, maybe TransCanada would change the route... which still wouldn't be all that bad. But I'm betting TransCanada just bluffing and counterprogramming increasing opposition, like grumbling from county officials in Kansas that they got hosed with big TransCanada tax exemptions.