Last updated on 2015.09.20
I am deeply grateful to Cody Winchester of that Sioux Falls paper for doing some much needed digging on the story of TransCanada Keystone's failure to deliver the tax revenues it promised on its first tar sands oil pipeline. In his big Sunday feature, Winchester supports Ben Dunsmoor's story that TransCanada paid only a third of the $9.14 million it promised would come flowing into South Dakota's school and county and state coffers each year. In 2010, South Dakota received $2.95 million in taxes from the pipeline, barely enough to offset the $2.85 million in tax refunds that TransCanada has claimed from South Dakota so far.
Winchester does basic journalism by asking TransCanada and the state why the first year's taxes were nearly 70% below what TransCanada promised. TransCanada and the state tell different stories:
TransCanada spokesman Shawn Howard said this past week that its 2010 tax bill was lower because the state appraised Keystone in January 2010, six months before the line began moving oil, so any oil income wasn't reflected in its valuation.
But the state has been heavily favoring a cost approach rather than an income approach to value Keystone, because the company being appraised — not TransCanada but the subsidiary Keystone Pipeline LP — is new enough that it doesn't have much useful income data, said Todd Bailey, the Department of Revenue property tax specialist who appraises Keystone.
...Howard of TransCanda did not respond to subsequent requests for clarification [Cody Winchester, "Promises Fall Short, Keystone XL Pipeline's Foes Say," that Sioux Falls paper, 2011.11.20].
So who blew this estimate? It wasn't our county assessors: utility projects like pipelines are centrally assessed, meaning Pierre does it. Pierre is both backing away from TransCanada's $9.14 million sales-pitch claim and covering for it. Bailey says TransCanada ran its own scenario back in 2007 without getting any advice from him or other state officials who would actually calculate TransCanada's taxes. The Public Utilities Commission is claiming it didn't consider TransCanada's tax estimate in its approval decision. Governor Daugaard says something is better than nothing and expresses his "hope that the taxes paid will meet TransCanada's projections upon full implementation over the next few years."
Alas, Winchester finds that under the cost approach, the 2011 valuation for the Keystone pipeline is already less than the 2010 evaluation. As Doug Wiken suggested last week, we may expect the lower-than-expected tax revenues from Keystone to go even lower.
The emptiest spin of the weekend comes from Keystone XL proponent and Black Hills neighbor Blaise Emerson:
Blaise Emerson, executive director of Black Hills Community Economic Development, has tesified in favor of Keystone XL at state and federal hearings. He said the relatively lower tax receipts from Keystone in the east does not trouble him, because taxes are only one reason to support Keystone XL.
"How I look at it, and hopefully the way most people look at it: Don't cry over the fact that you didn't get quite as much as you wanted," he said. "Maybe the estimate was a little bit high, but you wouldn't have that revenue at all if it wasn't coming through" [Winchester, 2011.11.20].
When a guy tells me that an estimate of $9.14 million compared to a reality of $2.95 million is "a little bit high," I worry about that guy's math skills.
Plain facts: once again, TransCanada inflated its numbers. As our Miner County neighbor Mike Sibson tells Winchester, TransCanada "bamboozled" us. The state could easily have checked those numbers and recognized they were off by a factor of three. Rather than holding TransCanada accountable and casting a wary eye on any further promises about economic benefits and environmental safety, our state officials are acting more like corporate lackeys and covering for that bamboozlement.