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As depicted in the map below from The Washington Post, the TransCanada Keystone Pipeline currently starts at the southern tip of the tar sands in Hardisty, Canada, veers east and enters the United Sates near Winnipeg. It continues straight down the middle of the country, through North Dakota, South Dakota, Nebraska, and Kansas, terminating in Cushing, Oklahoma.

The proposed TransCanada Keystone XL Pipeline (XL), the 875 mile route, adds to the existing pipeline with a direct crude oil transport route from Hardesty to Steele City, Nebraska which sits on the border with Kansas.

Property, sales, and excise taxes

Around this time last year, the State Department issued an impact statement assessing the projected collection of state and local taxes, among many other things. According to the executive summary, the impact statement estimated that during construction, project spending would generate approximately 3,900 direct construction jobs for one to two years in Montana, South Dakota, Nebraska, and Kansas. Once the pipeline is operational, it is expected to require about 50 workers, with 35 being permanent but some of whom may be located in Canada.

During construction, TransCanada would provide temporary housing in the form of construction camps: four in Montana, three in South Dakota, and one in Nebraska. There would also be local accommodations in central and southern Nebraska. The State Department estimated that these eight construction camps would generate the equivalent of one full year of property tax revenue, or about $4 million in total, for the counties in which they would be located.

In addition, the residents of the camps would generate revenue from sales and excise taxes, except in Montana which does not have a sales tax. This includes taxes from construction materials and construction worker spending in the local economy for basic living expenses like food, housing, gas, and entertainment. Because these workers are temporary, the revenue they generate would last only as long as the construction, which is estimated to be one to two years. That said, estimates of ongoing property taxes that county governments, school districts, and others would collect for the proposed pipeline facilities are sizeable, approaching $60 million.

The Tax Foundation estimated the impact of these various taxes during and after construction by state and summarized below:

keystone_table.png

Conditions for construction

Two things are required in order for XL to become reality, one of which already occurred. First, the Nebraska Supreme Court (the Court) needed to decide the case Thomson v. Heineman. The dispute in Thomson concerned which entity had the authority to determine a pipeline carrier’s route. On a technicality, the court struck down a Nebraska law that granted this authority to the governor. In so doing, the court upheld the route proposed by TransCanada Keystone Pipeline, LP.

Second, there must be a federal law enacted, approving of the construction project. Such a bill is making its way through Congress now. On Jan. 9, 2015, the House of Representatives completed its work and approved the bill with a 266 to 153 vote in favor of construction. The bill moved on to the Senate, which voted 63-32 to begin debate. Even if the legislation eventually goes to President Obama, The Huffington Post reports that the president promised to veto it, making passage contingent upon the Senate’s ability to override that veto.

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