Tax the TransCanada Pipeline

also online at KELOLand.com!

As mentioned earlier, the WEB Water Development Association has cause to be concerned about the TransCanada Keystone oil pipeline, which will cut across its network of rural water pipelines and those of seven other rural water providers. If we can't stop the pipeline (come on, PUC, help us out!), WEB proposes the state at least make sure TransCanada pays for the externalities of running a pipeline through our fair state.

On page 20 of an excellent document submitted to the PUC last June, WEB proposes the state tax the pipeline at the rate of 10 cents per barrel of oil transported across our state. Using TransCanada's numbers, WEB figures that tax -- a meager 0.1% of the cost of $100-a-barrel oil -- would bring the state $15,877,500 per year.

WEB isn't exactly proposing that we soak the rich here. The WEB document notes that the oil TransCanada would pump across the state could generate $28 million in one day. That calculation assumes $65 a barrel. At today's NYMEX future of $94.14 a barrel, try $40 million a day. TransCanada could cover $15.9 million in taxes on January 1 before lunch.

This pipeline tax proposal makes eminent sense. The tax is keyed directly to the amount of risk: the more oil TransCanada pumps, the more risk there is of a leak and the more possible cost there will be in emergency response and clean-up costs for the state. It provides a steady stream of revenue we can use to cover emergency response costs to leaks, fires, and explosions, not to mention the cost of road repair (cut chunks out of a couple hundred gravel roads, lay a pipe, then fill up the hole -- watch those trenches sink again within a couple years). It also more than doubles the $6.5 million Governor Rounds's Office of Economic Development estimates the state can make in property taxes on the pipeline.

South Dakota has the statutory authority to tax pipelines. If we are foolish enough to permit TransCanada to forcibly take our land, chop up our county roads, and create a new environmental hazard, we should make use of that taxation authority to cover the externalities that TransCanada would love to foist upon us. It's called responsibility: you make a mess, you have a responsibility to clean it up, or at least pay the people who will do the clean-up for you.