Putting the Kid Gloves Back on: Pipeline Tax Watered Down by Dems

Yesterday's Senate State Affairs Committee vote to send SB 190, the pipeline tax, to the floor wasn't quite the small victory of South Dakota interests over Big Oil that it appeared to be. Sure, it passed 6-3 (the three opposing votes were Kundson, Dempster, and Gray, all urban Republicans). But Senators Nesselhuf and Heidepriem, my fellow Democrats, put forward an amendment to water down the bill. Now, instead of the first $30M in revenue going into a crude oil pipeline compensation fund and any revenues about that going toward a water and environment fund, the tax has been capped at $30M. Once the fund reaches $30M, the state stops collecting the tax, and TransCanada and other pipeline operators get to ship their crude oil through the state for free. The tax doesn't kick in again until something bad happens (spill, explosion, etc.) and the pipeline compensation fund is spent down below $5M.

Now $30M may still sound like a lot of money. But let's put that amount in perspective (the back of the envelope, please):

1. Oil spilled by the Exxon Valdez in 1989: 250,000 barrels.
2. Amount Exxon spent to clean up that oil: $2.5 billion
3. Cleanup cost per barrel in 1989: $10,000
4. Average increase in Consumer Price Index since 1989: 4.6%
5. Cleanup cost per barrel in today's dollars: $23,500
6. Maximum size of oil spill a $30M cleanup fund could cover ("max spill"): 1280 barrels
7. Amount of oil to flow through Keystone pipeline each day by 2010: 590,000 barrels
8. Number of Exxon Valdez oil spills Keystone pipeline will carry through SD each year: 860
   
9. Max spill as percentage of daily volume: 0.22%
10. Time it would take max spill to flow past a given point: 3.12 minutes
    
11. Possible volume spillage characterized by TransCanada consultants as "pinhole leaks" that might not be detected for up to 90 days: 1.5%
12. Oil that could spill if TransCanada responded to, excavated, and clamped off a major leak within 45 minutes: 25,000 barrels

Environmental experts and TransCanada engineers reading this blog (and SiteMeter knows you're out there) are invited to submit corrections and clarifications to these estimates. After all, cleaning up an oil spill from a tanker in the ocean is surely a very different operation from cleaning up a spill from an underground pipeline.

But as it stands, it appears our cowardly legislators are capping the one guaranteed source of funding for dealing with environmental damage from a crude oil pipeline at $30M, enough to clean up a 1280-barrel spill. That doesn't come anywhere near covering the size of spills that could take place. $30M also doesn't cover further damages -- compensation for lost agricultural production value, legal costs, and whatever other expenses folks might seek reimbursement for following a pipeline accident.

As a commenter noted here last night, the pipeline tax is a great revenue opportunity for South Dakota. Not one penny comes out of South Dakotans' pockets, and the oil companies paying it will hardly notice two cents out of each $90 per barrel. We hit our own citizens much harder with utility hook-up fees, business licenses, and local taxes when they start up businesses in state; why are we giving a foreign oil corporation an almost free pass to ship black gold through our state without making them pay for the privilege?

Let's remove the cap from the pipeline tax. TransCanada is using and endangering South Dakota's resources to make its oil profits: South Dakota has every right to claim a piece of the action.