Knudson, State Affairs Cave to Big Energy, Continue $143M in Corporate Welfare

You know that state budget deficit South Dakota has been fretting about since Governor Rounds's first FY2010 budget address back in December? What if I could wave a magic wand that would put $143 million back in the budget? That would be enough to wipe out this year's and next year's combined budget shortfalls of $135 million and leave a down payment to cover 2011's projected $91 million deficit.

$143 million is the amount of potential sales- and excise-tax refunds the state may gave back to big industry projects that qualify for what Bob Mercer calls "special treatment." And that doesn't count the potential taxes we could receive when TransCanada starts plowing Keystone XL through West River.

Senator David Knudson (R-14/Sioux Falls) waved magic wand that could have brought a substantial portion of that $143 million back on budget last week, when he successfully hoghoused HB 1276 to exempt pipelines, railroads, power transmission lines, and any other "linear conveyance or transmission facility" from the refund program. Senator Bob Gray (R-24/Pierre) jumped in to add a provision that would make those refunds matters of public record. The bill passed Senate State Affairs, though good friend of TransCanada and other big energy corporations Senator Russell Olson (R-8/Madison) voted to keep handing money back to the wealthiest among us.

Alas, as Bob Mercer reports, the utilities lobbyists raised holy heck, and Knudson actually called the bill back to committee, where it was put to sleep. (See Bob Mercer, "State Has Paid $46 Million in Tax Refunds for Big Projects," Aberdeen American News, 2009.03.09.)

Now the argument for continuing these tax refunds, as stated by Rep. Val Rausch (R-4/Big Stone City, home of another really big energy project), is that these big energy companies are big investors in our state and thus promote economic development.

But consider Iberdrola Renewables, the company that got HB 1276 started. Iberdrola built the Buffalo Ridge I wind project in Brookings County. They fouled up their paperwork and missed out on the tax refund. They wanted the original version of HB 1276 to let them retroactively qualify for the refund. (Typical big corporate philosophy: if you can't follow the rules, change them!) Iberdrola sent Pierre energy lawyer Brett Koenecke (who also shills for TransCanada) to lobby for the bill... but then, even after State Affairs tucked its tail between its legs and restored the bill to the special treatment Iberdrola wanted, Iberdrola abruptly told Koenecke to tell Knudson et al. to let HB 1276 die. "We don't think going farther would be productive at this point," Koenecke told the committee. "We appreciate the consideration given to the bill."

In other words, that big tax refund wasn't essential for Iberdrola to complete Buffalo Ridge I or continue its operations. It sounds to me like that tax refund wasn't worth even this little bit of attention, not to mention the possibility that the exact numbers behind this corporate welfare would become public.

$143 million would go a long way toward balancing the state budget. Big corporations don't need that welfare to survive. Education, the arts, Birth to 3, and other valuable state programs do. Senator Knudson, toughen up, and tell the utilities they can pay their fair share for the privilege of doing business in South Dakota.

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Update 12:15 CDT: My lovely wife and I just bought into a mutual fund this morning, Calvert Global Alternative Energy Fund (CGAEX). The second largest holding in that portfolio? Iberdrola. Hey! About that tax refund... ;-)