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Kansas court upholds Keystone pipeline tax ruling

4/26/2013

By JOHN MILBURN

Associated Press

TOPEKA -- The Kansas Court of Appeals on Friday upheld a ruling in 2012 by a state tax court affirming a property tax exemption for the Canadian company building the Keystone XL pipeline.

In a ruling written by Judge David Bruns, the court said TransCanada was entitled to the property tax exemption because Kansas refineries have indirect access to the crude oil that passes through the pipeline daily.

Six Kansas counties -- Butler, Clay, Cowley, Dickinson, Marion and Washington -- and the Kansas Department of Revenue appealed the Court of Tax Appeals ruling last year, saying they were entitled to levy taxes against TransCanada because there was no direct access to the oil in Kansas. The exemption is believed to be worth nearly $19 million.

Jeannine Koranda, spokeswoman for the revenue department, said the agency was reviewing the ruling and declined to comment.

Messages left with TransCanada officials seeking comment to the ruling were not immediately returned.

The pipeline segment is part of the proposed Keystone XL pipeline that will extend from Canada to the Gulf Coast in Texas. The Kansas portion would link the pipeline to Cushing, Okla. The project requires approval from President Barack Obama because the route crosses international boundaries.

A State Department report has cleared the way for a final decision on the pipeline, which will transport oil extracted from Alberta tar sands more than 1,700 miles to refineries on the Gulf Coast. The pipeline would carry an estimated 800,000 barrels of oil a day.

Kansas legislators passed the property tax exemption in 2006 when Calgary-based TransCanada was exploring the route through Kansas. The law was designed to encourage energy projects in the state and included income tax credits, financing and 10-year property tax exemptions for such projects, including pipelines.

The Court of Tax Appeals said in its ruling in 2012 the law doesn't require the refineries to have direct access to the pipeline. The judges then noted the refineries are getting the oil indirectly, satisfying stipulations of the law.