Bill would end property tax exemptions for pipelines

? A Kansas Senate committee advanced a bill Tuesday that would end the practice of giving automatic 10-year property tax exemptions to companies that build new oil and gas pipelines in Kansas.

It was not immediately clear, however, whether the bill could become a vehicle for other tax measures to be added as amendments when it’s debated by the full Senate in an effort to fill the state’s projected $600 million budget shortfall for the next fiscal year.

That pipeline tax abatement was enacted in 2006, mainly through the efforts of former Rep. Carl Holmes, R-Liberal, and it went largely unnoticed until construction of the Keystone XL pipeline began. That’s when counties and school districts who would have benefited from the property tax revenues learned that the taxes had already been abated for 10 years.

“The (law) was probably not our best work,” said Sen. Jim Denning, R-Overland Park, who is now pushing the bill to repeal the exemption for future pipelines.

Under the bill, any existing pipeline, including those now under construction, that have already qualified for the exemption would get to keep it. But it would not be available for any new pipeline constructed after Jan. 1 of this year.

Denning said when the 2006 law was passed, many lawmakers thought the Keystone pipeline would provide a kind of “on ramp” that would enable Kansas oil producers to ship their oil to Cushing, Okla., home of one of the largest crude oil storage hubs in the United States. But he said that turned out not to be the case.

But he said Kansas may have another opportunity soon because of increased oil production in northern Colorado.

“There’s lots of activity, especially in northern Colorado, where there are enormous oil fields,” Denning said. “And I think in 2017 or 2018 there is going to be two very big pipelines come from northern Colorado to Cushing,”

By repealing the 2006 law that gives pipeline companies automatic 10-year tax abatements, Denning said, Kansas will be in a better position to negotiate for access onto those pipelines for Kansas producers.

State budget officials could not estimate how much additional revenue the bill would generate because nobody knows yet what new pipelines will be built in the future.

But some lawmakers are concerned that the bill could become a vehicle to repeal other kinds of property tax exemptions, including those for wind energy production and transmission.

“It very well could be,” said Senate Democratic Leader Anthony Hensley, of Topeka.

He said another tax measure many Republicans have sought is to repeal the so-called “homestead” exemption for residential property taxes. That law exempts the first $20,000 of assessed valuation on a home from the statewide 20-mill property tax that funds public schools.

But Sen. Les Donovan, R-Wichita, who chairs the Assessment and Taxation Committee, said it was not his intent to create a vehicle for other tax bills.

“We passed it out on its merits,” Donovan said. “There were no schemes or anything afloat that I know of.”

Senate Majority Leader Terry Bruce, R-Hutchinson, said the bill will likely come up for debate by the full Senate in May, after lawmakers return for the final wrap-up portion of the session.