This article was first published by InsideClimate News.
If the Keystone XL oil pipeline were approved today, residents in the
six states along its route would not receive equal treatment from
TransCanada, the company that wants to build the project.
The differences are particularly striking when it comes to tax
revenue and environmental protection. States with stronger regulations
have won protections for their citizens, while other states sometimes
focused more on meeting TransCanada’s needs.
In Kansas, for example, lawmakers gave TransCanada a 10-year tax
exemption, which means the state won’t receive any property tax revenue
from the pipeline. Meanwhile, each of the other five states—Montana,
South Dakota, Nebraska, Oklahoma and Texas—would earn between $14
million and $63 million a year, according to U.S. State Department estimates.
InsideClimate News Keystone XL State Comparison Primer
When it comes to route changes and protection for landowners,
residents of Texas, Oklahoma and Kansas have fared the worst, because
their states haven’t created any regulations to safeguard their
interests.
“All the power is in the hands of the pipeline companies,” said Chris
Wilson, an independent environmental consultant from Texas who opposes
the Keystone XL. Landowners along the route “are really screwed…there’s
no one in the government they can call for help.”
The Obama administration put the Keystone XL on hold
in November, saying it needed another year to reassess the
environmental risks the project could pose. Republican lawmakers,
meanwhile, are trying to force
the president to make his decision by February 21. The pipeline would
move oil from the tar sands of Alberta to the U.S. Gulf Coast.
Because the Keystone XL would cross state boundaries, both federal
and state agencies are involved in its regulation. The U.S. Pipeline and
Hazardous Materials Safety Administration (PHMSA)
handles safety issues, such as pipeline thickness and operating
pressure. Individual states are responsible for pipeline siting, the
process that determines a pipeline’s exact route within state borders.
But only the state of Montana has chosen to exercise that power,
leaving citizens who object to the pipeline’s path in other states no
option but to shell out money for a court battle, or appeal to local
officials who often lack the resources and experience to challenge a
major corporation.
In Montana, however, the state’s Department of Environmental Quality
used a decades-old siting act to minimize environmental damage along
the route. TransCanada has rerouted more than 100 miles of the Keystone
XL in response to agency and landowner concerns. If the pipeline is
approved, the company also must post a bond so funds are available to
repair construction-related damage.
DEQ staffer Greg Hallsten, who worked on Keystone XL siting, said
that although TransCanada sometimes objected to the agency’s reroutes,
its complaints were overruled.
“We have [siting] authority in the state,” he said. “Our authority’s never been challenged along those lines.”
TransCanada spokesman Terry Cunha said the vast differences in
pipeline regulation reflect the political landscape of each state. “We
appreciate that each state has their own guidelines,” he said. “It’s not
up to us to modify or create legislation. We’re working with the state
governments to meet [their] guidelines and get this project approved.”
Other states could follow Montana’s lead by pressuring their
legislators to create pipeline regulation, said Pat Parenteau, a Vermont
Law School professor who studies land use and environmental policy. “If
there’s a popular enough demand,” it can be done, he said.
That’s what happened in Nebraska, where residents worked for years
to persuade their lawmakers to reroute the Keystone XL out of the
ecologically sensitive Sandhills. Farmers and ranchers picketed the
governor’s mansion, traveled to Washington, D.C. and repeatedly called
for a special session to draft siting regulations for interstate
pipelines. As the momentum grew, TransCanada offered Nebraska a $100 million dollar spill bond for the Sandhills region—a protection it didn’t offer any of the other states.
Nebraska Gov. Dave Heineman finally called a special session in November, where bills were passed
to move the pipeline out of the Sandhills and to give the Public
Service Commission authority to site future oil pipelines (excluding
Keystone XL). TransCanada is now working with state environmental
officials to establish a new route for its pipeline.
What Nebraskans have done is very significant, said Mary Boyle, a spokeswoman for the nonpartisan watchdog group Common Cause.
Legislators won’t act unless they feel outside pressure from
constituents, she said, so getting those bills passed is “no small
accomplishment…Nebraska citizens clearly proved this can be done.”
—-
Few Protections from Eminent Domain
Despite the new regulations in Nebraska, landowners there, like
landowners in all the Keystone XL states, have felt helpless when
TransCanada used eminent domain to take their land.
All six states have given the company the power of eminent domain.
While the eminent domain laws vary from state to state, they generally
allow projects built for a “public” good—including railroads,
transmission lines and highways—to use private land after paying
landowners a fair price that’s determined by the courts. But the laws
aren’t specific about what “public” means, and pipeline opponents say
Keystone XL shouldn’t be allowed to use eminent domain because it’s not
serving the United States public.
Harlan Hentges, an attorney who represented an Oklahoma family that
challenged the taking of their land, says TransCanada is a foreign
company transporting foreign goods (crude oil) across the U.S. for
export. “To me it’s an outrage from beginning to end,” he said.
Montana is the only state that offers its residents some protection from eminent domain.
Its siting act requires that pipelines be built on public land
whenever it’s economically feasible. As a result, 77 percent of the
pipeline’s route through Montana falls on private land, while that
number rises to more than 92 percent in the other five states. In Texas, the entire pipeline is routed through private land.
Montana also doesn’t allow companies to take landowners to court
until the DEQ gives a project a final stamp of approval, known as a
Certificate of Compliance. In early December, the DEQ’s Hallsten told InsideClimate News that the agency didn’t plan to issue the certificate
to TransCanada unless the federal government approved the pipeline. But
Gov. Brian Schweitzer overruled the agency
on Dec. 15 when he announced that TransCanada had met the siting act’s
requirements and that the DEQ would issue the certificate within a few
weeks.
Sue Kelso, the Oklahoma landowner who hired Hentges to challenge
TransCanada’s use of eminent domain on her family farm, said she feels
abandoned by her state officials.
But the Oklahoma Corporation Commission—the agency in charge of pipeline
regulation—has little control over interstate pipelines. Commission
spokesman Matt Skinner said the agency’s role is limited to remediation
after oil spills.
Kelso’s troubles began when a TransCanada land agent offered her
$3,000 for a permanent easement on her property. Kelso said the agent
claimed the pipeline would carry regular crude oil, but she soon found
that Keystone XL would transport the tar sands oil known as diluted
bitumen, or dilbit. Unlike conventional crude, the exact chemical
composition of dilbit remains a trade secret. There’s little research on dilbit and no peer-reviewed studies on how it affects pipeline corrosion.
Kelso’s concerns escalated after an Enbridge pipeline spilled dilbit
into Michigan’s Kalamazoo River in July 2010. The Environmental
Protection Agency doesn’t expect the cleanup of that spill to be
completed until the end of 2012.
“I live in fear that this pipeline will go through and ruin all the water,” Kelso said.
When Kelso refused to sign TransCanada’s contract, she said the land
agent threatened to use eminent domain. “She told me [to] either take
what they offered or they’d condemn our property and take it anyway.”
That’s when Kelso hired Hentges.
In August, TransCanada voluntarily rerouted the pipeline around
Kelso’s property. Hentges believes the company wanted to avoid going to
court, where the case might set a precedent and open the floodgates to
eminent domain challenges in other Keystone XL states.
In Texas, property rights activist Debra Medina is lobbying legislators to clarify the state’s eminent domain law. State law grants
the operators of common carrier pipelines—defined as “to or for the
public for hire”—the power of eminent domain, but it’s unclear if the
word “public” refers to Texans or the public at large, Medina said. She
asked the Railroad Commission and the Texas attorney general’s office
for clarification but never received an answer.
Everyone knows that Texans value property ownership, she said. “And
yet, in our law, we’ve given eminent domain authority to private
businesses and nobody’s making sure the businesses who exercise that
power meet the necessary criteria.”
—-
No Comfort for One of Landowners’ Greatest Fears
Neither the federal government nor any of the Keystone XL states have
offered landowners much protection from one of their greatest fears: an
oil spill that affects their property.
Federal regulations require pipeline companies to file oil spill
response plans, but TransCanada hasn’t completed its plan for the
Keystone XL. TransCanada spokesman Terry Cunha said the plan will be
finalized once the entire project, including the new route through
Nebraska, is confirmed.
Even after the plan is released, it will be difficult for landowners
along the route to examine the document, said Carl Weimer, executive
director of the Pipeline Safety Trust,
a nonprofit that promotes fuel transportation safety. The spill plans
are created by pipeline companies and given directly to PHMSA for
review, so there’s no opportunity for public input. A PHMSA spokesman
said the secrecy is necessary because the plans contain potentially
sensitive information about public safety and homeland security.
Montana rancher Darrell Garoutte thinks the public has a right to
review those documents. “After the BP [Gulf spill] fiasco, I’m concerned
that any plan without public scrutiny will be lacking in most areas.”
Weimer said that some states, including Washington and Alaska, have
taken steps to make emergency response information more transparent. But
none of the Keystone XL states are included in that group, he said.
Sandy Barnick, whose farm near Glendive, Mont., would be crossed by
Keystone XL, said the remoteness of her rural county, which she
describes as “in the middle of nowhere,” has heightened her fear of
pipeline accidents and spills.
TransCanada told InsideClimate News that the company is ready to
respond to emergencies. “[We’ve] procured and stored equipment, hired
personnel and contractors along the length of the pipeline specifically
to ensure we are capable of responding quickly,” said spokesman Shawn
Howard.
But Zona Vig worries that the company will have trouble responding to
an emergency on her South Dakota family ranch, which is 100 miles from
the nearest hospital. The region is crisscrossed by dirt roads that
become impassable during rains, Vig said. “What happens if you have a
leak? How are you going to get people out here, [especially] in a
blizzard when the wind is blowing and the snow’s coming down?”
Vig and her neighbors are accustomed to taking care of themselves.
Her husband pilots a small plane that’s sometimes used for medical
emergencies, and her son is part of the county’s volunteer fire
department. But there are no other oil pipelines in Meade County, and
Vig said they’re not prepared to deal with a spill.
Barnick, the Montana farmer, says state officials should be doing
more to address landowner concerns. She blames their inaction on the
fact that most of the pipeline’s route runs through counties with small
populations and little political clout. “I feel [like] we’re
dispensable.”
Pipeline Tax Revenue Varies By State
Some landowners say the promise of tax revenue has made state and
local officials blind to citizen concerns. According to the State
Department’s Final Environmental Impact Statement,
the pipeline would generate property taxes ranging from $14 million per
year for Oklahoma to $63 million per year for Montana. But experts say
actual tax revenues may vary significantly from those estimates.
The State Department calculations for Montana were done without an
accurate understanding of the state’s tax laws, said Ed Caplis, director
of Tax Policy and Research at the Montana Department of Revenue. While
the State Department projects tax revenues of $63 million a year,
Caplis’ department’s assessment, based on data provided by TransCanada,
puts the number at $80 million.
South Dakota taxes pipelines based on the income they generate, so
“it’s rather difficult assessing a future project,” said Mike
Houdyshell, director of the Property and Special Tax Division at the
South Dakota Department of Revenue. Pipelines don’t make any income
until they’re operational, and that income is dependent on market forces
during the time of operation.
Houdyshell’s department wasn’t involved in the State Department
property tax estimates. Their only assessment for Keystone XL is an
estimate of the property tax for Harding County (one of nine counties in
the pipeline’s path), which comes out to about one million dollars. That’s substantially less than the State Department estimate of $3.3 million dollars for Harding County.
An existing TransCanada pipeline, simply called Keystone, has generated far less in property taxes for South Dakota than TransCanada originally projected.
“We don’t know how [TransCanada] arrived at those numbers,”
Houdyshell said. “Obviously they were overstated to some extent—we don’t
really know why.”
—-
The state of Kansas stands to gain the least financially from the
Keystone XL. Its situation is unique because the first Keystone pipeline
already runs through Kansas, and part of that pipeline would act as a
bridge between two sections of the new pipeline. However, the Keystone
XL would increase the amount of dilbit flowing through Kansas, so
TransCanada would need to build additional pump stations in the state to
handle the new capacity (up to 830,000 barrels of oil per day).
When TransCanada began planning the Keystone pipeline in 2005, Marion
County commissioner Dan Holub was one of the few Kansas officials who
opposed it. “I’m scared to death of what they’re running through there,”
he said, referring to the unknown dangers of dilbit.
Holub tried to persuade state officials to help address landowners concerns. But instead, the Kansas legislature passed a series of bills
to incentivize energy processing, including one that granted large
pipelines a property tax exemption for up to 10 years. The new pump
stations for Keystone XL would likely receive the same tax exemption.
Holub says TransCanada didn’t need the tax cut, which cost his county
some much-needed funds. According to the Kansas Department of Revenue,
the Keystone pipeline would have brought $2.9 million in property taxes
to Marion County in 2011.
But State Sen. Jay Emler, who voted for the tax cut, said the bill
guaranteed a steady source of crude oil for the state’s refineries and
was meant to encourage TransCanada to build the pipeline through Kansas.
“One of their lobbyists came to my office in 2005 and said, ‘If we
don’t get this tax exemption, we won’t bring the pipeline through
Kansas.'”
Emler said a recent letter from a TransCanada lobbyist says the tax
exemption was just one of several factors in deciding where to build the
pipeline, so the company might have brought Keystone through Kansas
anyway. “Hindsight is always 20/20,” Emler said. If the legislature had
known in 2005 that TransCanada didn’t need the exemption, “why would we
have given it to them?”
The Kansas Department of Revenue has challenged
the tax exemption and the matter is now before the Kansas Court of Tax
Appeals. If TransCanada loses its exemption, a court spokesperson said,
the company would have to pay all its back taxes.
TransCanada also got a tax break in South Dakota when the first
Keystone pipeline was routed through the state. South Dakota legislators
passed a bill in the 1990s to grant large energy projects, including
ethanol plants and wind blade factories, a refund on a 4 percent
contractor excise tax. The law wasn’t intended for oil pipelines, said
Scott Heidepriem, a former state senator who now runs a law firm in
Sioux Falls, but it was so loosely worded that TransCanada qualified.
Heidepriem said the first Keystone pipeline is eligible for more than
$30 million dollars from the tax refund, though records from the South
Dakota Department of Revenue show that the company had claimed just $2.7 million
as of September 2011. Heidepriem argues that TransCanada didn’t need
the tax break because the pipeline would have come through the state
anyway. It doesn’t make sense to give them all this money while the
legislature cuts the state’s education budget, he said.
In 2008, Heidepriem represented a group of landowners along the first
Keystone pipeline who fought TransCanada’s use of eminent domain. The
landowners eventually settled, but details of the settlement remain
confidential.
The South Dakota legislature tightened the language on the tax refund
law after the first Keystone pipeline was built. The Keystone XL would
be eligible for no more than $10 million dollars, and the program will
expire at the end of 2012.
But South Dakota’s lawmakers haven’t taken action on something
landowners along the route have been lobbying for: A bond to make sure
their property would be cleaned up in the event of a spill. Between 2008
and 2010, the legislature failed on three separate occasions to approve
a spill bond that would have imposed a several-cents-per-barrel tax on
Keystone XL oil. If the money wasn’t used, it would have been returned
to TransCanada.
Vig helped lobby for the bond as a member of a grassroots group called Dakota Rural Action.
She described the experience like “walking into a brick wall.”
TransCanada fought it tooth and nail, she said, “and our legislators
listened to them and voted against it.”
Lisa Song is a reporter for InsideClimate News, a non-profit journalism group focusing on climate news..
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